[Federal Register Volume 81, Number 169 (Wednesday, August 31, 2016)]
[Proposed Rules]
[Pages 60130-60168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20663]
[[Page 60129]]
Vol. 81
Wednesday,
No. 169
August 31, 2016
Part II
Department of Homeland Security
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8 CFR Parts 103, 212, and 274a
International Entrepreneur Rule; Proposed Rule
Federal Register / Vol. 81 , No. 169 / Wednesday, August 31, 2016 /
Proposed Rules
[[Page 60130]]
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DEPARTMENT OF HOMELAND SECURITY
8 CFR Parts 103, 212, and 274a
[CIS No. 2572-15; DHS Docket No. USCIS-2015-0006]
RIN 1615-AC04
International Entrepreneur Rule
AGENCY: U.S. Citizenship and Immigration Services, DHS.
ACTION: Proposed rule.
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SUMMARY: The Department of Homeland Security (DHS) proposes to amend
its regulations implementing the Secretary of Homeland Security's
discretionary parole authority to increase and enhance
entrepreneurship, innovation, and job creation in the United States.
The proposed rule would add new regulatory provisions guiding the use
of parole on a case-by-case basis with respect to entrepreneurs of
start-up entities whose entry into the United States would provide a
significant public benefit through the substantial and demonstrated
potential for rapid business growth and job creation. Such potential
would be indicated by, among other things, the receipt of significant
capital investment from U.S. investors with established records of
successful investments, or obtaining significant awards or grants from
certain Federal, State or local government entities. If granted, parole
would provide a temporary initial stay of up to 2 years (which may be
extended by up to an additional 3 years) to facilitate the applicant's
ability to oversee and grow his or her start-up entity in the United
States. A subsequent request for re-parole would be considered only
when the entrepreneur and his or her start-up entity continues to
provide a significant public benefit as evidenced by substantial
increases in capital investment, revenue, or job creation. DHS believes
that a regulatory process for seeking and granting parole in this
business-creation context--including by establishing criteria for
evaluating individual parole applications on a case-by-case basis--is
important given the complexities involved in such adjudications and the
need for guidance regarding the general criteria for eligibility by the
start-up entrepreneurs, entities, and investors involved.
DATES: Written comments must be received on or before October 17, 2016.
ADDRESSES: You may submit comments, identified by DHS Docket No. USCIS-
2015-0006, by any one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the Web site instructions for submitting comments.
Email: You may submit comments directly to U.S.
Citizenship and Immigration Services (USCIS) by email at
[email protected]. Please include DHS docket number USCIS-2015-
0006 in the subject line of the message.
Mail: You may submit comments directly to USCIS by mail by
sending correspondence to Samantha Deshommes, Chief, Regulatory
Coordination Division, Office of Policy and Strategy, U.S. Citizenship
and Immigration Services, Department of Homeland Security, 20
Massachusetts Avenue NW., Washington, DC 20529. To ensure proper
handling, please reference DHS Docket No. USCIS-2015-0006 in your
correspondence. This mailing address may be used for paper, disk, or
CD-ROM submissions.
Hand Delivery/Courier: You may submit comments directly to
USCIS through hand delivery to: Samantha Deshommes, Chief, Regulatory
Coordination Division, Office of Policy and Strategy, U.S. Citizenship
and Immigration Services, Department of Homeland Security, 20
Massachusetts Avenue NW., Washington, DC 20529; Telephone (202) 272-
8377. To ensure proper handling, please reference DHS Docket No. USCIS-
2015-0006 in your correspondence.
FOR FURTHER INFORMATION CONTACT: Steven Viger, Adjudications Officer,
Office of Policy and Strategy, U.S. Citizenship and Immigration
Services, Department of Homeland Security, 20 Massachusetts Avenue NW.,
Suite 1100, Washington, DC 20529-2140; Telephone (202) 272-8377.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Public Participation
II. Executive Summary
A. Purpose of the Regulatory Action
B. Legal Authority
C. Summary of Proposed Amendments
D. Costs and Benefits
III. Background
A. Discretionary Parole Authority
B. Historical Uses of Parole
C. Significant Public Benefit of Attracting Foreign
Entrepreneurs to the United States
D. Proposal for Parole for Entrepreneurs
IV. Proposed Changes
A. Overview of Parole for Entrepreneurs
B. Criteria for Initial Parole
1. Recent Formation of a Start-Up Entity
2. Applicant is an Entrepreneur Who Is Well-Positioned To
Advance the Entity's Business
3. Capital Investment or Government Funding Criteria
C. Application Requirements for Initial Period of Parole
1. Filing the Application for Entrepreneur Parole (Form I-941)
2. Requirement To Appear for Submission of Biometric Information
3. Income-Related Condition on Parole
4. Adjudication of Applications
5. Limitation on Number of Entrepreneur Parolees Per Start-Up
Entity
6. Authorized Period for Initial Grant of Entrepreneur Parole
7. Spouses and Minor Children
D. Employment Authorization
1. Employment Authorization Incident to Parole With a Specific
Employer
2. Employment Authorization Eligibility for Spouses
3. Documentation for Employment Eligibility Verification (Form
I-9)
4. Technical Changes
E. Material Change Reporting
F. Re-Parole
1. Criteria for Re-Parole
2. Application Requirements for Re-Parole
3. Ensuring Continuous Employment Authorization
G. Termination of Parole
1. Automatic Termination
2. Termination on Notice
H. Automatic Adjustment of Investment and Revenue Amount
Requirements
I. Technical Change
V. Statutory and Regulatory Requirements
A. Unfunded Mandates Reform Act of 1995
B. Small Business Regulatory Enforcement Fairness Act of 1996
C. Executive Orders 12866 and 13563
1. Summary
2. Background and Purpose of the Proposed Rule
3. Population of Entrepreneurs Potentially Eligible
4. Costs
5. Benefits
D. Regulatory Flexibility Act
E. Executive Order 13132
F. Executive Order 12988
G. Paperwork Reduction Act
I. Public Participation
DHS invites comments, data, and information from all interested
parties, including advocacy groups, nongovernmental organizations,
community-based organizations, entrepreneurs, investors, other entities
in the entrepreneurial ecosystem of the United States, and legal
representatives who specialize in immigration law on any and all
aspects of this proposed rule. Comments that will provide the most
assistance to DHS in developing these procedures will reference a
specific portion of the proposed rule, explain the reason for any
recommended change, and include data, information, or authorities that
support such recommended change. DHS is generally seeking comments on:
A. Proposed filing requirements and procedures;
B. Proposed definitions and criteria for evaluating parole
applications,
[[Page 60131]]
including investment, award, revenue, job creation, and alternative
criteria;
C. Proposed conditions, including limits on the number of
entrepreneur parolees per start-up entity and time limits on parole
periods;
D. Proposed provisions establishing employment authorization for
entrepreneurs incident to parole;
E. Proposed provisions regarding termination of parole; and
F. Proposed opportunity to request re-parole, length of period for
re-parole, and limitation on number of re-parole opportunities.
DHS also invites comments on the economic analysis supporting this
rule and the proposed new parole request form for entrepreneurs.
Instructions: All submissions must include the agency name and the
DHS Docket No. USCIS-2015-0006 for this rulemaking. Regardless of the
method used for submitting comments or material, all submissions will
be posted, without change, to the Federal eRulemaking Portal at http://www.regulations.gov, and will include any personal information you
provide. Therefore, submitting this information makes it public. You
may wish to consider limiting the amount of personal information that
you provide in any voluntary public comment submission you make to DHS.
DHS may withhold information provided in comments from public viewing
that it determines may impact the privacy of an individual or is
offensive. For additional information, please read the Privacy Act
notice that is available via the link in the footer of http://www.regulations.gov.
Docket: For access to the docket to read background documents or
comments received, go to http://www.regulations.gov.
II. Executive Summary
A. Purpose of the Regulatory Action
Section 212(d)(5) of the Immigration and Nationality Act (INA), 8
U.S.C. 1182(d)(5), grants the Secretary of Homeland Security the
discretionary authority to parole individuals into the United States,
on a case-by-case basis, for urgent humanitarian reasons or significant
public benefit. DHS proposes to amend its regulations implementing this
authority to increase and enhance entrepreneurship, innovation, and job
creation in the United States. As described in more detail below, the
proposed rule would establish general criteria for the use of parole
with respect to entrepreneurs of start-up entities whose entry into the
United States would provide a significant public benefit through the
substantial and demonstrated potential for rapid growth and job
creation. In all cases, whether to parole a particular individual under
this rule would be a discretionary determination that would be made on
a case-by-case basis.
Given the complexities involved in adjudicating applications in
this context and the need for guidance regarding the criteria for
exercising parole in this area, DHS has decided to establish by
regulation the criteria for the case-by-case evaluation of parole
applications filed by entrepreneurs of start-up entities. By including
such criteria in regulation, as well as establishing application
requirements that are specifically tailored to capture the necessary
information for processing parole requests on this basis, DHS expects
to facilitate the use of parole in this area.
As discussed, the proposed rule would establish criteria for
seeking and obtaining parole based on the creation of a start-up entity
in the United States. DHS proposes that to be considered for parole
under this rule, an applicant would need to demonstrate that his or her
parole would provide a significant public benefit because he or she is
the entrepreneur of a new start-up entity in the United States that has
significant potential for rapid growth and job creation. DHS proposes
that such potential would be indicated by, among other things, the
receipt of (1) significant capital financing from U.S. investors with
established records of successful investments or (2) significant awards
or grants from certain Federal, State or local government entities. DHS
also proposes alternative criteria for applicants who partially meet
the proposed thresholds for capital financing or government awards or
grants and who can provide additional reliable and compelling evidence
of their entities' significant potential for rapid growth and job
creation. An applicant would qualify for further consideration by
showing that he or she has a substantial ownership interest in such an
entity, has an active and central role in the entity's operations, and
would substantially further the entity's ability to engage in research
and development or otherwise conduct and grow its business in the
United States. The grant of parole is intended to facilitate the
applicant's ability to oversee and grow the start-up entity.
DHS believes that this proposal would 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. Particularly in light of the complex
considerations involved in entrepreneur-based parole requests, DHS also
believes that this proposal will provide a transparent framework by
which DHS will exercise its discretion to adjudicate such requests on a
case-by-case basis under section 212(d)(5) of the INA, 8 U.S.C.
1182(d)(5).
B. Legal Authority
The Secretary of Homeland Security's authority for the proposed
regulatory amendments can be found in various provisions of the
immigration laws. Section 402(4) of the Homeland Security Act of 2002
(HSA), Public Law 107-296, 116 Stat. 2135, 6 U.S.C. 202(4), provides
the Secretary the authority to administer and enforce the immigration
and nationality laws. Sections 103(a)(1) and (3) of the INA, 8 U.S.C.
1103(a)(1), (3), expressly authorize the Secretary to establish rules
and regulations governing parole. Section 212(d)(5) of the INA, 8
U.S.C. 1182(d)(5), vests in the Secretary the discretionary authority
to grant parole for urgent humanitarian reasons or significant public
benefit to applicants for admission on a case-by-case basis.\1\ Section
274A(h)(3)(B) of the INA, 8 U.S.C. 1324a(h)(3)(B), recognizes the
Secretary's general authority to extend employment authorization to
noncitizens in the United States. And section 101(b)(1)(F) of the HSA,
6 U.S.C. 111(b)(1)(F), establishes as a primary mission of DHS the duty
to ``ensure that the overall economic security of the United States is
not diminished by efforts, activities, and programs aimed at securing
the homeland.''
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\1\ In sections 402 and 451 of the HSA, Congress transferred
from the Attorney General to the Secretary of Homeland Security the
general authority to enforce and administer the immigration laws,
including those pertaining to parole. In accordance with section
1517 of title XV of the HSA, any reference to the Attorney General
in a provision of the INA describing functions transferred from the
Department of Justice to DHS ``shall be deemed to refer to the
Secretary'' of Homeland Security. See 6 U.S.C. 557 (codifying the
HSA, tit. XV, section 1517). Authorities and functions of DHS to
administer and enforce the immigration laws are appropriately
delegated to DHS employees and others in accordance with section
102(b)(1) of the HSA, 6 U.S.C. 112(b)(1); section 103(a) of the INA,
8 U.S.C. 1103(a); and 8 CFR 2.1.
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C. Summary of Proposed Amendments
DHS is proposing to add a new section 8 CFR 212.19 to provide
guidance with respect to the use of parole for entrepreneurs of start-
up entities based upon significant public
[[Page 60132]]
benefit. An individual seeking to operate and grow his or her start-up
entity in the United States would generally need to demonstrate the
following to be considered for a discretionary grant of parole under
this proposed rule:
1. Formation of New Start-Up Entity. The applicant has recently
formed a new entity in the United States that has lawfully done
business since its creation and has substantial potential for rapid
growth and job creation. DHS proposes that an entity may be
generally considered recently formed if it was created within the 3
years preceding the date of the filing of the initial parole
application.
2. Applicant is an Entrepreneur. The applicant is an
entrepreneur of the start-up entity who is well-positioned to
advance the entity's business. DHS proposes that an applicant may
generally meet this standard by providing evidence that he or she:
(1) Possesses a significant (at least 15 percent) 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 United States. Such an applicant
cannot be a mere investor.
3. Significant U.S. Capital Investment or Government Funding.
The applicant can further validate, through reliable supporting
evidence, the entity's substantial potential for rapid growth and
job creation. DHS proposes that an applicant may be able to satisfy
this criterion in one of several ways:
a. Investments from established U.S. investors. The applicant
may show that the entity has received significant investment of
capital from certain qualified U.S. investors with established
records of successful investments. DHS proposes that an applicant
would generally be able to meet this standard by demonstrating that
the start-up entity has received investments of capital totaling
$345,000 or more from established U.S. investors (such as venture
capital firms, angel investors, or start-up accelerators) with a
history of substantial investment in successful start-up entities.
b. Government grants. The applicant may show that the start-up
entity 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. DHS proposes that an
applicant would generally be able to meet this standard by
demonstrating that the start-up entity has received monetary awards
or grants totaling $100,000 or more from government entities that
typically provide such funding to U.S. businesses for economic,
research and development, or job creation purposes.
c. Alternative criteria. DHS further proposes alternative
criteria under which an applicant who partially meets one or more of
the above sub-criteria related to capital investment or government
funding may be considered for parole under this rule 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. Such evidence would need to serve as a compelling validation
of the entity's substantial potential for rapid growth and job
creation.
DHS proposes that an applicant who meets the above criteria (and
his or her spouse and minor, unmarried children, if any) generally may
be considered under this rule for a discretionary grant of parole
lasting up to 2 years based on the significant public benefit that
would be provided by the applicant's (or family's) parole into the
United States. An applicant would be required to file a new application
specifically tailored for entrepreneurs to demonstrate eligibility for
parole based upon significant public benefit under this rule, along
with proposed fees. Applicants would also be required to appear for
collection of biometric information. DHS further proposes that no more
than three entrepreneurs may receive parole with respect to any one
qualifying entity.
USCIS adjudicators would be required to consider the totality of
the evidence, including evidence obtained by USCIS through background
checks and other means, to determine whether the applicant has
satisfied the above criteria, whether the specific applicant's parole
would provide a significant public benefit, and whether negative
factors exist that warrant denial of parole as a matter of discretion.
To grant parole, adjudicators would be required to conclude, based on
the totality of the circumstances, that both: (1) The applicant's
parole would provide a significant public benefit, and (2) the
applicant merits a grant of parole as a matter of discretion.
DHS further proposes that if parole is granted, the entrepreneur
would be authorized for employment incident to the grant of parole, but
only with respect to the entrepreneur's start-up entity. The
entrepreneur's spouse and children, if any, would not be authorized for
employment incident to the grant of parole, but the entrepreneur's
spouse, if paroled into the United States pursuant to 8 CFR 212.19,
would be permitted to apply for employment authorization consistent
with proposed 8 CFR 274a.12(c)(34). DHS retains the right to revoke any
such grant of parole at any time as a matter of discretion or if the
Department determines that parole no longer provides a significant
public benefit, such as when the entity has ceased operations in the
United States or DHS believes that the application involves fraud or
misrepresentation.
As noted, the purpose of the proposed parole process is to provide
qualified entrepreneurs of high-potential start-up entities in the
United States with the improved ability to conduct research and
development and expand the entities' operations in the United States so
that our nation's economy may benefit from such development and
expansion, including through increased capital expenditures, innovation
and job creation. DHS proposes to allow individuals granted parole
under this rule to be considered for re-parole for an additional period
of up to 3 years if, and only if, they can demonstrate that their
entities have shown signs of significant growth since the initial grant
of parole and such entities continue to have substantial potential for
rapid growth and job creation. As proposed, an applicant under this
rule would generally need to demonstrate the following to be considered
for a discretionary grant of an additional period of parole:
1. Continuation of Start-Up Entity. The entity continues to be a
start-up entity as defined by the proposed rule. For purposes of
seeking re-parole, an applicant would be able to meet this standard
by showing that the entity: (a) Has been lawfully operating in the
United States 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
continues to be an entrepreneur of the start-up entity who is well-
positioned to advance the entity's business. DHS proposes that an
applicant may generally meet this standard by providing evidence
that he or she: (a) Continues to possess a significant (at least 10
percent) ownership interest in the entity; 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 entity in conducting and continuing
to grow its business in the United States. This reduced ownership
amount takes into account the need of some successful start-up
entities to raise additional venture capital financing by selling
ownership interest during their initial years of operation.
3. Significant U.S. Investment/Revenue/Job Creation. The
applicant can further validate, through reliable supporting
evidence, the start-up entity's continued potential for rapid growth
and job creation. DHS proposes that an applicant would be able to
satisfy this criterion in one of several ways:
a. Investments from established U.S. investors. The applicant
may show that during the initial period of parole the start-up
entity received additional substantial investments of capital,
including through qualified investments from U.S. investors with
established records of successful investments; significant awards or
grants from government entities that regularly provide such funding
to start-up entities; or
[[Page 60133]]
a combination of both. DHS proposes that an applicant would
generally be expected to demonstrate that the entity received at
least $500,000 in additional qualifying funding during the initial
parole period. As noted previously, any private investments must be
made by qualified U.S. investors (such as venture capital firms,
angel investors, or start-up accelerators) with a history of
substantial investment in successful start-up entities. Government
awards or grants must be from Federal, State or local government
entities with expertise in economic development, research and
development, and/or job creation.
b. Revenue generation. The applicant may show that the start-up
entity has generated substantial and rapidly increasing revenue in
the United States during the initial parole period. DHS proposes
that an applicant would generally be expected to demonstrate that
the entity reached at least $500,000 in annual revenue, with average
annualized revenue growth of at least 20 percent, during the initial
parole period.
c. Job creation. The applicant may show that the start-up entity
has demonstrated substantial job creation in the United States
during the initial parole period. DHS proposes that an applicant
would generally be expected to demonstrate that the entity created
at least 10 full-time jobs for U.S. workers during the initial
parole period.
d. Alternative criteria. As with initial parole, DHS further
proposes alternative criteria under which an applicant who partially
meets one or more of the above sub-criteria related to capital
investment, revenue generation, or job creation may be considered
for re-parole under this rule if he or she provides additional
reliable and compelling evidence that his or her parole would
continue to provide a significant public benefit. As discussed
above, such evidence would need to serve as a compelling validation
of the entity's substantial potential for rapid growth and job
creation.
DHS proposes that an applicant who generally meets the above
criteria may be considered for one additional grant of parole to work
with the same start-up entity based on the significant public benefit
that would be served by his or her continued parole in the United
States, if the applicant also merits a favorable exercise of
discretion. If granted, re-parole may be for up to 3 years, for a total
maximum period of 5 years for parole under 8 CFR 212.19. No more than
three entrepreneurs (and their spouses and children) may receive such
additional periods of parole with respect to any one qualifying entity.
As with initial parole applications, USCIS adjudicators would be
required to consider the totality of the evidence, including evidence
obtained by USCIS through verification methods, to determine whether
the applicant has satisfied the above criteria and whether his or her
continued parole would provide a significant public benefit. To re-
parole, adjudicators would be required to conclude, based on the
totality of the circumstances, both: (1) That the applicant's continued
parole would provide a significant public benefit, and (2) that the
applicant continues to merit parole as a matter of discretion. If re-
paroled, DHS retains the right to revoke parole at any time as a matter
of discretion or if the Department determines that parole no longer
provides a significant public benefit, such as when the entity has
ceased operations in the United States or DHS believes that the
applicant committed fraud or made material misrepresentations.
Finally, DHS is proposing conforming changes to the employment
authorization regulations at 8 CFR 274a.12(b) and (c), the employment
eligibility verification regulations at 8 CFR 274a.2(b), and fee
regulations at 8 CFR 103.7(b)(i). The proposed rule would amend 8 CFR
274a.12(b) by: (1) Adding entrepreneur parolees to the classes of
aliens authorized for employment incident to their immigration status
or parole, and (2) providing for temporary employment authorization for
those applying for re-parole. The proposed rule would amend 8 CFR
274a.12(c) by extending eligibility for employment authorization to the
spouse of an entrepreneur paroled into the United States under 8 CFR
212.19. The proposed rule would amend 8 CFR 274a.2(b) by designating
the entrepreneur's foreign passport and Arrival/Departure Record (Form
I-94) indicating entrepreneur parole as acceptable evidence for
employment eligibility verification (Form I-9) purposes.\2\ Finally,
the proposed rule would amend 8 CFR 103.7(b)(i) by including the fee
for the new proposed application form.
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\2\ Additionally, DHS is also proposing a technical change to
this section to add the Department of State (DOS) Consular Report of
Birth Abroad (Form FS-240, or successor form) to the ``List C''
column of acceptable documents for Form I-9 purposes.
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D. Costs and Benefits
DHS does not anticipate that this rule, if finalized, would
generate significant costs and burdens to private or public entities.
Costs of the rule would stem from filing fees and opportunity costs
associated with applying for parole, and the requirement that the
entrepreneur alert DHS to any material changes.
DHS estimates that 2,940 entrepreneurs could be eligible for parole
annually. Each applicant for parole would face a total filing cost--
including the application form fee, biometric filing fee, travel costs,
and associated opportunity costs--of $1,480, resulting in a total cost
of $4,349,827 (undiscounted) for the first full year the rule could
take effect and any subsequent year. Additionally, dependent family
members (spouses and children) seeking parole with the principal
applicant would be required to file an Application for Travel Document
(Form I-131) and submit biographical information and biometrics. DHS
estimates approximately 3,234 dependent spouses and children could seek
parole based on the base estimate of 2,940 principal applicants. Each
spouse and child 14 years of age and older seeking parole would face a
total cost of $550 per applicant, for a total aggregate cost of
$1,779,604.\3\ Additionally, spouses who apply for work authorization
via a Form I-765 application would incur a total additional cost of
$416.20 each. Based on the same number of entrepreneurs, the estimated
2,940 spouses \4\ would incur total costs of $1,223,630 (undiscounted).
The total cost of the rule to include direct filing costs and monetized
non-filing costs is estimated to be $7,353,061 annually.
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\3\ For parole requests for children under the age of 14, only
the filing fee will be required, as they do not appear for biometric
collection. Applicants under the age of 14 and over the age of 79
are not required to be fingerprinted. However, they may still be
required to attend a biometrics appointment in order to have their
photograph and signature captured.
\4\ DHS used a simple one-to-one mapping of entrepreneurs to
spouses to obtain 1,813 spouses, the same number as entrepreneur
parolees.
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DHS anticipates that establishing a parole process for those
entrepreneurs who stand to provide a significant public benefit would
advance the U.S. economy by enhancing innovation, generating capital
investments, and creating jobs. DHS does not expect significant
negative consequences or labor market impacts from this rule; indeed,
DHS believes this proposal would encourage entrepreneurs to pursue
business opportunities in the United States rather than abroad, which
can be expected to generate significant scientific, research and
development, and technological impacts that could create new products
and produce positive spillover effects to other businesses and sectors.
The impacts stand to benefit the economy by supporting and
strengthening high-growth, job-creating businesses in the United
States.
III. Background
A. Discretionary Parole Authority
The Secretary of Homeland Security has discretionary authority to
grant temporary parole ``under conditions as he may prescribe only on a
case-by-case
[[Page 60134]]
basis for urgent humanitarian reasons or significant public benefit
[to] any individual applying for admission to the United States.'' INA
section 212(d)(5)(A), 8 U.S.C. 1182(d)(5)(A).\5\ The Secretary's parole
authority is expansive. Congress did not define the phrase ``urgent
humanitarian reasons or significant public benefit,'' entrusting
interpretation and application of those standards to the Secretary.
Aside from requiring case-by-case determinations, Congress limited the
parole authority by prohibiting its use with respect to two classes of
applicants for admissions: (1) Aliens who are refugees (unless the
Secretary determines that parole is required for a particular alien for
compelling reasons in the public interest), see INA section
212(d)(5)(B), 8 U.S.C. 1182(d)(5)(B); and (2) alien crewmen during
certain labor disputes, see INA section 214(f)(2)(A), 8 U.S.C.
1184(f)(2)(A).
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\5\ Although section 212(d)(5) continues to refer to the
Attorney General, the parole authority now resides exclusively with
the Secretary of Homeland Security. See Matter of Arrabally, 25 I. &
N. Dec. 771, 777 n.5 (BIA 2012).
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Parole decisions are discretionary determinations and must be made
on a case-by-case basis consistent with the INA. DHS may exercise its
authority to determine that an individual's parole into the United
States is justified by urgent humanitarian reasons or significant
public benefit. Even when one of those standards would be met, DHS may
nevertheless deny parole as a matter of discretion based on other
factors.\6\ In making such discretionary determinations, USCIS
considers all relevant information, including any criminal history or
other serious adverse factors that would weigh against a favorable
exercise of discretion.
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\6\ The denial of parole is not subject to judicial review. See
INA section 242(a)(2)(B)(ii), 8 U.S.C. 1252(a)(2)(B)(ii).
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Parole is not an admission to the United States. See INA section
101(a)(13)(B), 8 U.S.C. 1101(a)(13)(B); 8 CFR 1.2 (``An arriving alien
remains an arriving alien even if paroled pursuant to section 212(d)(5)
of the Act, and even after any such parole is terminated or
revoked.''). Parole may also be terminated at any time in DHS's
discretion, consistent with existing regulations; in those cases, the
individual is ``restored to the status that he or she had at the time
of parole.'' 8 CFR 212.5(e); see also INA section 212(d)(5), 8 U.S.C.
1182(d)(5).
DHS regulations at 8 CFR 212.5 describe DHS's discretionary parole
authority for arriving aliens to the United States (other than detained
aliens), including the authority to set the terms and conditions of
parole. Some conditions are described in the regulations, including
requiring reasonable assurances that the parolee will appear at all
hearings and will depart from the United States when required to do so.
See 8 CFR 212.5(d).
Each of the DHS immigration components--USCIS, U.S. Customs and
Border Protection (CBP), and U.S. Immigration and Customs Enforcement
(ICE)--has been delegated the authority to parole applicants for
admission in accordance with section 212(d)(5) of the INA, 8 U.S.C.
1182(d)(5). See 8 CFR 212.5(a). The parole authority is often utilized
to permit an alien who is outside the United States to travel to and
come into the United States without a visa. USCIS, however, also
accepts requests for ``advance parole'' by aliens who seek
authorization to depart the United States and return to the country
pursuant to parole in the future.\7\ See 8 CFR 212.5(f); Application
for Travel Document (Form I-131). Advance authorization of parole by
USCIS does not guarantee that the alien will be paroled by CBP upon his
or her appearance at a port of entry. Rather, with a grant of advance
parole, the alien is issued a document authorizing travel (in lieu of a
visa) indicating the presumption that CBP will favorably exercise
discretion to parole the alien in the future (so long as material
circumstances do not change).
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\7\ Aliens who seek parole as entrepreneurs under this rule may
need to apply for advance parole if at the time of application they
are present in the United States after admission in a nonimmigrant
classification, as USCIS is unable to grant parole to aliens who are
not ``applicants for admission.'' See INA section 212(d)(5), 8
U.S.C. 1182(d)(5).
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Currently, upon an alien's arrival to the United States with a
parole travel document (e.g., a Department of State (DOS) foil,
Authorization for Parole of an Alien into the United States (Form I-
512L), or an Employment Authorization Document (Form I-766)), a CBP
officer at a port of entry inspects the prospective parolee. If parole
is authorized, the CBP officer issues an Arrival/Departure Record (Form
I-94) documenting the grant of parole and the length of the parolee's
authorized parole period. See 8 CFR 235.1(h)(2). Importantly, CBP
retains the authority to deny parole to a parole applicant or to modify
the length of advance parole authorized by USCIS. See 8 CFR 212.5(c).
Because parole does not constitute an admission, individuals may be
paroled into the United States even if they are inadmissible. See
section 212(a) of the INA, 8 U.S.C. 1182(a). Further, parole does not
confer any immigration ``status.'' See section 101(a)(13)(B) of the
INA, 8 U.S.C. 1101(a)(13)(B); section 212(d)(5)(A) of the INA, 8 U.S.C.
1182(d)(5)(A). Parole does not provide a parolee with temporary
nonimmigrant status or lawful permanent resident status. Nor does it
provide the parolee with a basis for changing status to that of a
nonimmigrant or adjusting status to that of a lawful permanent
resident, unless the parolee is otherwise eligible.
Under current regulations, once paroled into the United States, a
parolee is eligible to request employment authorization from USCIS by
filing an Application for Employment Authorization (Form I-765) with
USCIS. See 8 CFR 274a.12(c)(11). If employment authorization is
granted, USCIS issues the parolee an EAD with an expiration date that
is commensurate with the period of parole on the parolee's Arrival/
Departure Record (Form I-94). The parolee may use this EAD to
demonstrate identity and employment authorization to an employer for
Form I-9 verification purposes as required by section 274A(a) and (b)
of the INA, 8 U.S.C. 1324a(a) and (b). Under current regulations, the
parolee is not employment authorized by virtue of being paroled, but
instead only after receiving a discretionary grant of employment
authorization from USCIS based on the Application for Employment
Authorization.
Parole may terminate automatically upon the expiration of the
authorized parole period or upon the departure of the individual from
the United States. See 8 CFR 212.5(e)(1). Parole also may be terminated
on written notice when DHS determines that the individual no longer
warrants parole or through the service of a Notice to Appear (NTA). See
8 CFR 212.5(e)(2)(i).
B. Historical Uses of Parole
DHS and the former Immigration and Naturalization Service (INS)
have long extended parole to individuals for urgent humanitarian
reasons or significant public benefit. The authority has been exercised
on behalf of individuals on an ad hoc basis, as well as through policy
guidance or regulations identifying classes of individuals to be
considered for parole through individualized case-by-case
adjudications. For example, parole has long been used on an ad hoc
basis for individuals with serious medical conditions who need to come
into the United States for medical treatment, individuals subject to
prosecution or who are required to testify in court, individuals
cooperating with law enforcement agencies, volunteers offering
assistance in response to
[[Page 60135]]
natural or other disasters, and foreign officials and other dignitaries
who are inadmissible but seek to attend events in the country.
Depending on the circumstances, such uses of parole have been justified
on ``urgent humanitarian'' or ``significant public benefit'' grounds,
or both.
Parole has also long been exercised on a case-by-case basis with
respect to individuals falling within certain designated parameters, as
defined through regulation or policy guidance. Longstanding
regulations, for example, provide discretionary criteria and other
guidance for the use of parole with respect to arriving aliens detained
in the United States. See 8 CFR 212.5. Those regulations provide that
parole from immigration custody generally would be ``justified'' on a
case-by-case basis if an individual falls within one of several
specific categories, including individuals with serious medical
conditions, pregnant women, juveniles, or individuals whose ``continued
detention is not in the public interest'' as determined by certain
listed officials. Id. Through longstanding policy memoranda or other
guidance, DHS and the former INS have also provided instructions on the
use of parole for other individuals, including certain vulnerable
individuals who have been denied refugee status.
More recently, DHS has provided guidance on the case-by-case
exercise of the parole authority through policy memoranda or notices in
the Federal Register, including, for example, on behalf of certain
Cuban nationals, certain individuals seeking to enter the Commonwealth
of the Northern Mariana Islands (CNMI), and certain family members of
U.S. military personnel:
In 2007, DHS implemented the Cuban Family Reunification
Parole Program to promote safe, legal, and orderly migration as an
alternative to maritime crossings from Cuba. This program offers
Cuban beneficiaries of approved family-based immigrant visa
petitions an opportunity to apply for parole rather than remain in
Cuba while awaiting the availability of an immigrant visa number.\8\
USCIS implemented the program based on the significant public
benefit rationales of ``enabling the United States to meet its
commitments under the Migration Accords'' and ``reducing the
perceived need for family members left behind in Cuba to make
irregular and inherently dangerous attempts to arrive in the United
States.'' \9\
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\8\ Cuban Family Reunification Parole Program, 72 FR 65,588
(Nov. 21, 2007); see also Changes to Application Procedures for the
Cuban Family Reunification Parole Program, 79 FR 75579 (Dec. 18,
2014).
\9\ Id.
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In 2009, DHS announced a policy on the use of parole
into the CNMI for certain foreign workers, as well as visitors from
the Russian Federation and the People's Republic of China.\10\ The
parole policy was justified based on the economic benefit such
workers and visitors would provide to the U.S. territory.
---------------------------------------------------------------------------
\10\ See 8 CFR 214.2(w)(1)(v); USCIS, Commonwealth of the
Northern Mariana Islands (CNMI) Federalization of Immigration Law
(Sept. 22, 2014), available at http://www.uscis.gov/laws/immigration-commonwealth-northern-mariana-islands-cnmi/commonwealth-northern-mariana-islands-cnmi-federalization-immigration-law; USCIS,
Extending Parole in the CNMI (Jan. 30, 2012), available at http://www.uscis.gov/laws/immigration-commonwealth-northern-mariana-islands-cnmi/extending-parole-cnmi.
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In 2013, DHS issued guidance encouraging the use of
parole for spouses, children, and parents of active duty members of
the U.S. Armed Forces, individuals in the Selected Reserve of the
Ready Reserve, and individuals who previously served in the U.S.
Armed Forces or the Selected Reserve of the Ready Reserve.\11\ The
cited benefits included mitigating the adverse effects on Service
Members and military preparedness stemming from the stress and
anxiety of their immediate family members due to immigration
concerns.
---------------------------------------------------------------------------
\11\ See USCIS Policy Mem. PM-602-0091, Parole of Spouses,
Children and Parents of Active Duty Members of the U. S. Armed
Forces, the Selected Reserve of the Ready Reserve, and Former
Members of the U.S. Armed Forces or Selected Reserve of the Ready
Reserve and the Effect of Parole on Inadmissibility under
Immigration and Nationality Act Sec. 212(a)(6)(A)(i) at 2-3 (Nov.
13, 2013), available at http://www.uscis.gov/sites/default/files/USCIS/Laws/Memoranda/2013/2013-1115_Parole_in_Place_Memo_.pdf.
---------------------------------------------------------------------------
C. Significant Public Benefit From Attracting Foreign Entrepreneurs to
the United States
DHS believes that enabling foreign entrepreneurs to establish and
grow their start-up entities in the United States, rather than abroad,
would yield a significant public benefit in certain cases. This would
be expected to promote entrepreneurship and investment; facilitate
research and development and other forms of innovation; support the
continued growth of the U.S. economy; and lead to job creation for U.S.
workers. To this end, DHS has considered the economic benefits of
foreign entrepreneurs.
Evidence indicates that young business ventures, especially new
start-up businesses, are important economic drivers and that the U.S.
economy significantly benefits from the economic activity generated by
entrepreneurs who start and grow new businesses here rather than
abroad.\12\ Indeed, evidence suggests that future economic and job
growth for nations will hinge heavily on their ability to attract
entrepreneurs, including those from abroad.\13\ As entrepreneurs have
increasing opportunities to establish and operate their start-up
entities around the world, the need to create conditions that reduce
barriers to entry and attract entrepreneurs has become a priority
policy goal for a number of economically advanced and less economically
advanced nations.\14\ To compete for talented entrepreneurs, these
countries have, or are planning to have, processes similar to that
proposed in this rule.\15\
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\12\ See, e.g. Edward L. Glaeser, Sari Pekkala Kerr, and William
R. Kerr ``Entrepreneurship And Urban Growth: An Empirical Assessment
With Historical Mines'' (2013). Working Papers 13-15, Center for
Economic Studies, U.S. Census Bureau. (Finding that increasing the
proportion of startup employment within a region increases the
growth rate of overall employment and wages.); John C. Haltiwanger,
Ron S. Jarmin, Javier Miranda, ``Who Creates Jobs? Small vs. Large
vs. Young'' NBER Working Paper No. 16300, August 2010, available at
http://www.nber.org/papers/w16300 (Findings ``highlight the
important role of business startups and young businesses in U.S. job
creation.''); Jose Plehn-Dujowich, ``Product Innovations by Young
and Small Firms,'' Small Business Administration, Research Summary
No. 408 available at http://www.sba.gov/advocacy/7540/621871
(Finding that ``innovation is characteristic of both young and small
firms''); Tim Kane, ``The Importance of Startups in Job Creation and
Job Destruction,'' July 2010 Kauffman Foundation Research Series:
Firm Formation and Economic Growth, available at http://
www.kauffman.org/~/media/kauffman_org/
research%20reports%20and%20covers/2010/07/
firm_formation_importance_of_startups.pdf (showing the importance of
startups for net job growth in the U.S. economy).
\13\ Council of Economic Advisers The Economic Effects of
Administrative Action on Immigration, 18 (November 2014, updated
February 2015), available at https://www.whitehouse.gov/sites/defaulUfiles/docs/economic_effects_of_immigration_ea_february_2015_update_final_v2.pdf
(``A body of academic research conducted over the past ten years has
found that high-skilled immigration has positive effects on
innovation (as measured by patenting) and on total factor
productivity.''); Robert Litan, Start-Up Slowdown; Council on
Foreign Relation, Jan./Feb. 2015, available at https://www.foreignaffairs.com/articles/americas/2014-12-15/start-slowdown;
Robert Fairlie, Kauffman Index of Entrepreneurial Activity, 1996-
2011, Ewing Marion Kauffman Foundation, March 19, 2012, http://www.kauffman.org/uploadedfiles/kiea_2012_report.pdf (finding that
immigrants were more than twice as likely as Americans to start new
businesses in 2011); Madeleine Sumption, ``Visas for Entrepreneurs:
How Countries Are Seeking Out Immigrant Job Creators,'' June 13,
2012 Migration Information Source, Migration Institute, available at
http://www.migrationpolicy.org/article/visas-entrepreneurs-how-countries-are-seeking-out-immigrant-job-creators.
\14\ Robert Litan, ``Start-Up Slowdown''; Council on Foreign
Relation, Jan./Feb. 2015, available at https://www.foreignaffairs.com/articles/americas/2014-12-15/start-slowdown;
Madeleine Sumption, ``Visas for Entrepreneurs: How Countries Are
Seeking Out Immigrant Job Creators,'' June 13, 2012 Migration
Information Source, Migration Institute, available at http://www.migrationpolicy.org/article/visas-entrepreneurs-how-countries-are-seeking-out-immigrant-job-creators.
\15\ Canada Start-up Visa, http://www.cic.gc.ca/english/immigrate/business/start-up/; UK Tier 1 (Entrepreneur) visa, https://www.gov.uk/tier-1-entrepreneur/overview.
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[[Page 60136]]
Allowing certain qualified entrepreneurs to come to the United
States as parolees on a case-by-case basis would produce a significant
public benefit through substantial and positive contributions to
innovation, economic growth, and job creation. New business ventures,
especially start-up businesses, are important economic drivers.\16\ A
significant percentage of the employment generated by high-tech
manufacturers backed by U.S. venture capital investment has come from
immigrant-founded companies.\17\ A study on the top 50 venture capital-
funded start-up companies in the United States showed that 48 percent
had at least one immigrant founder.\18\
---------------------------------------------------------------------------
\16\ Tim Kane, ``The Importance of Startups in Job Creation and
Job Destruction,'' July 2010 Kauffman Foundation Research Series:
Firm Formation and Economic Growth, available at http://
www.kauffman.org/~/media/kauffman_org/
research%20reports%20and%20covers/2010/07/
firm_formation_importance_of_startups.pdf (showing the importance of
startups for net job growth in the U.S. economy); Edward L. Glaeser,
Sari Pekkala Kerr, and William R. Kerr, ``Entrepreneurship And Urban
Growth: An Empirical Assessment With Historical Mines,'' Working
Papers 13-15, Center for Economic Studies, U.S. Census Bureau, 2013
(finding that increasing the proportion of startup employment within
a region increases the growth rate of overall employment and
wages.); John C. Haltiwanger, Ron S. Jarmin, Javier Miranda, ``Who
Creates Jobs? Small vs. Large vs: Young,'' NBER Working Paper No.
16300, August 2010, available at http://www.nber.org/papers/w16300
(highlighting ``the important role of business startups and young
businesses in U.S. job creation'').
\17\ Stuart Anderson & Michaela Platzer, ``American Made: The
Impact of Immigrant Entrepreneurs and Professionals on U.S.
Competitiveness,'' National Venture Capital Association, Nov. 2006,
at 11.
\18\ Stuart Anderson, ``Immigration Founders and Key Personnel
in America's 50 Top Venture-Funded Companies,'' Dec. 2010, available
at http://www.nfap.com/pdf/NFAPPolicyBriefImmigrantFoundersandKeyPersonnelinAmericasTopVentureFundedCompanies.pdf.
---------------------------------------------------------------------------
Innovative foreign-born entrepreneurs are critical forces in the
U.S. economy, having founded roughly one-quarter of technology and
engineering companies created between 2006 and 2012.\19\ As of June
2013, publicly-traded immigrant-founded venture-backed companies had a
total market capitalization of $900 billion.\20\ Another study by the
National Venture Capital Association found that 40 percent of the
immigrant founders in the survey entered the United States as
employment-sponsored immigrants, 38 percent as international students,
13 percent as family-sponsored immigrants, and the rest in other
categories.\21\ These studies, however, do not reflect the number of
entrepreneurs who may have decided to start businesses in other
countries because of the difficulty in locating their businesses in the
United States due to current immigration policies.\22\ The full
potential of foreign entrepreneurs to benefit the U.S. economy through,
for example, cutting-edge research, revenue generation, and job
creation, is thus unknown. That current immigration policies create
barriers for foreign entrepreneurs was a primary conclusion of the
USCIS Entrepreneurs in Residence (EIR) program,\23\ which was launched
in 2012 to better understand how entrepreneurs fit within existing
immigration classifications and to make policy recommendations based on
its findings.
---------------------------------------------------------------------------
\19\ Vivek Wadhwa, AnnaLee Saxenian & F. Daniel Siciliano,
``America's New Immigrant Entrepreneurs: Then and Now,'' Kauffman
Foundation, Oct. 2012, at 3, available at http://www.kauffman.org/what-we-do/research/immigration-and-the-american-economy/americas-new-immigrant-entrepreneurs-then-and-now.
\20\ Stuart Anderson, ``American Made 2.0: How Immigrant
Entrepreneurs Continue to Contribute to the U.S. Economy,'' National
Venture Capital Association, 2013, at 5, available at http://nvca.org/research/stats-studies/.
\21\ Stuart Anderson, ``American Made 2.0--How Immigrant
Entrepreneurs Continue to Contribute to the U.S. Economy,'' supra
28.
\22\ See, e.g., Vivek Wadhwa, ``The Immigrant Exodus''
(Philadelphia: Wharton Digital Press) (2012); Amy Grenier,
``Majority of U.S. Patents Granted to Foreign Individuals,
Immigration Impact,'' April 11, 2014, available at http://immigrationimpact.com/2014/04/11/majority-of-u-s-patents-granted-to-foreign-individuals/ (noting difficulties that foreign inventors
face in coming to and staying in the United States).
\23\ See http://www.uscis.gov/about-us/entrepreneurs-residence-initiative/entrepreneurs-residence-eir. For the EIR program, USCIS
recruited both start-up experts from the private sector, using DHS's
Loaned Executive Program, and internal immigration experts from
across the agency. Working within the framework of current
immigration law, the team set out with the overarching goal of
optimizing existing visa categories used by entrepreneurs to provide
pathways that are clear, consistent, and aligned with business
realities.
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D. Proposal for Parole for Entrepreneurs
DHS proposes to exercise its parole authority, on a case-by-case
basis, for entrepreneurs of start-up entities whose parole into the
United States would provide a significant public benefit through the
substantial potential of his or her start-up entity for rapid growth
and job creation. Under the proposed rule, such potential would be
evidenced by, among other things, the receipt of (1) substantial
significant capital financing by U.S. investors with established
records of successful investments or (2) significant awards or grants
from certain government entities. DHS also proposes alternative
criteria for applicants who partially meet the proposed thresholds for
capital financing or government awards or grants and who can provide
additional reliable and compelling evidence of their entities'
significant potential for rapid growth and job creation.
If granted, parole would be authorized for up to 2 years to
facilitate the entrepreneur's ability to oversee and grow his or her
start-up entity in the United States. A subsequent request for re-
parole would be considered only if the start-up entity continues to
show significant promise of rapid growth and job creation through
substantial and demonstrated increases in qualifying funding (whether
capital investment or government grants or awards), revenue, or job
creation. In all cases, whether to parole a particular individual under
this rule would be a discretionary determination that would be made on
a case-by-case basis. DHS believes that a regulatory process for
seeking and granting parole in this business-creation context--
including by establishing criteria for evaluating individual parole
applications on a case-by-case basis--is important given the
complexities involved in such adjudications and the need for general
guidance regarding the relevant factors for eligibility by the start-up
entrepreneurs, entities, and investors involved.
IV. Proposed Changes
In this rule, DHS is proposing to add a new section 8 CFR 212.19 to
its regulations to set forth application procedures and criteria
specifically for considering parole requests filed by entrepreneurs of
start-up entities. See proposed 8 CFR 212.19. Consistent with this new
section, the proposed rule would also: (1) Amend 8 CFR 274a.12(b) to
authorize entrepreneur parolees to work for their approved start-up
entities in the United States, see proposed 8 CFR 274a.12(b)(37); (2)
amend 8 CFR 274a.12(c) to extend eligibility for employment
authorization to the spouses of entrepreneur parolees, see proposed 8
CFR 274a.12(c)(34); (3) make a conforming amendment to the employment
eligibility verification regulations at 8 CFR 274a.2(b)(v)(A)(5) to
allow entrepreneur parolees to use their foreign passports and Arrival/
Departure Records (Forms I-94) indicating they have entrepreneur parole
as evidence of identity and employment authorization for purposes of
meeting the Employment Eligibility Verification (Form I-9)
requirements, see proposed 8 CFR 274a.2(b)(v)(A)(5); and (4) amend 8
CFR 103.7(b)(1)(i) to include a fee for the new proposed entrepreneur
parole application form, see proposed 8 CFR 103.7(b)(1)(i)(FFF).
A. Overview of Parole for Entrepreneurs
At the proposed section 8 CFR 212.19, DHS sets forth the
application
[[Page 60137]]
requirements and proposed criteria for extending discretionary parole,
on a case-by-case basis, to entrepreneurs of start-up entities and
their spouses and children. As required by statute, the entrepreneur
must demonstrate that his or her parole into the United States would
provide a significant public benefit. DHS proposes that an individual
may meet that standard under this rule by demonstrating that his or her
start-up entity has substantial potential for rapid growth and job
creation and that his or her parole would significantly help the entity
conduct and grow its business here. See proposed new 8 CFR
212.19(b)(2). As described in more detail below, an applicant would
generally be able to meet this standard by demonstrating the following:
The entrepreneur's entity was recently formed (i.e.,
generally within the 3 years immediately preceding the filing date
of the entrepreneur's application for parole) in the United States
and has the substantial potential for rapid growth and job creation.
See proposed 8 CFR 212.19(a)(2).
The applicant is an entrepreneur in that he or she
possesses a substantial ownership interest (i.e., generally 15
percent or more) in the entity and has an active and central role in
the entity such that he or she is well-positioned to advance the
entity's business. See proposed 8 CFR 212.19(a)(1).
The entity has: (1) Received substantial investment
from U.S. investors with established records of successful
investments; or (2) received substantial awards or grants from
certain Federal, State, or local government entities. See proposed 8
CFR 212.19(b)(2)(ii). Alternatively, an applicant who partially
meets one or more of these two sub-criteria may be considered for
parole if he or she provides additional reliable and compelling
evidence that his or her parole would provide a significant public
benefit. See proposed 8 CFR 212.19(b)(2)(iii).
Under the proposed rule, an applicant would file a new application
specifically tailored for entrepreneurs to demonstrate eligibility for
parole based upon significant public benefit, along with proposed fees.
See proposed 8 CFR 212.19(b)(1). Applicants would also be required to
appear for collection of biometric information. See proposed 8 CFR
212.19(e). To grant parole, USCIS adjudicators would be required to
conclude, following an individualized assessment and based on the
totality of the circumstances, that both: (1) The applicant's parole
would provide a significant public benefit, and (2) the applicant
merits a grant of parole as a matter of discretion. See proposed 8 CFR
212.19(d)(1).
If a determination is made that parole of the applicant would
provide a significant public benefit, DHS may parole the entrepreneur
for a period of up to 2 years, with an opportunity to apply for one
additional period of parole of up to 3 years upon showing that parole
would continue to provide a significant public benefit. See proposed 8
CFR 212.19(d)(2) and (h). DHS further proposes that no more than three
principal entrepreneurs may receive parole with respect to any one
qualifying entity. See proposed 8 CFR 212.19(f).
Following is a detailed discussion of the specific provisions
proposed by DHS in this rulemaking.
B. Criteria for Initial Parole Consideration
To be considered for an initial grant of parole based on
significant public benefit under this rule, DHS is proposing that the
individual generally meet the following criteria:
1. Recent Formation of a Start-Up Entity
The key criterion under this proposed rule is the formation of a
new entity in the United States that has substantial potential to
rapidly increase revenue and create jobs for U.S. workers. DHS thus
proposes that an applicant for parole under this rule be able to show
that his or her start-up entity was recently formed in the United
States, has lawfully done business during any period of operation since
its date of formation, and has the substantial potential to experience
rapid growth and job creation, including through the significant
attraction of capital investment or government awards or grants. See
proposed 8 CFR 212.19(a)(2). An entity that is the basis for a request
for parole under this section may be considered ``recently formed'' if
it is a U.S. business entity that was created within the 3 years
immediately preceding the filing date of the entrepreneur's application
for parole. Id.
As a preliminary matter, DHS proposes that a proffered start-up
entity must meet the definition of ``U.S. business entity'' at proposed
8 CFR 212.19(a)(9). The term is defined as any corporation, limited
liability company, partnership, or other entity that is organized under
Federal law or the laws of any State,\24\ and that conducts business in
the United States that is not an investment vehicle primarily engaged
in the offer, purchase, sale or trading of securities, futures
contracts, derivatives or similar instruments. See proposed 8 CFR
212.19(a)(9). DHS believes that this definition appropriately captures
the range of start-up entities that are formed in the United States by
entrepreneurs and that have the substantial potential for rapid growth
and job creation. DHS is proposing to exclude an entity that is an
investment vehicle primarily engaged in the offer, purchase, sale or
trading of securities, futures contracts, derivatives or similar
instruments to ensure that the start-up entities receiving investment
capital under this proposed rule are not merely serving as a conduit
for reinvestment, but providing or seeking to provide goods or services
with the substantial potential for rapid growth and job creation.
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\24\ ``State'' is a defined term at INA section 101(a)(36). In
addition to the 50 States, the term ``includes the District of
Columbia, Puerto Rico, Guam, the Virgin Islands of the United
States, and the Commonwealth of the Northern Mariana Islands.''
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As noted above, an entity must be recently formed in the United
States to be considered a start-up entity for purposes of this rule.
See proposed 8 CFR 212.19(a)(2). DHS proposes that an entity that is
the basis for seeking parole under this rule may be considered recently
formed if it is less than 3 years old at the time of filing the parole
application.\25\ Id. This limitation reflects the Department's
intention for parole under this proposed rule to incentivize and
support the creation and growth of new businesses in the United States,
so that the country may benefit from their potential for rapid growth
and job creation. DHS recognizes that the term ``start-up'' is usually
used to refer to entities in early stages of development, including
various financing rounds used to raise capital and expand the new
business, but ``goes beyond a company just getting off the ground.''
\26\ DHS believes that limiting the definition of ``start-up'' in this
proposed rule to entities that are less than 3 years old at the time
the parole application is filed is reasonable to ensure that the
entrepreneur's entity is the type of new business likely to experience
rapid growth and job creation, while still allowing a reasonable amount
of time for the entrepreneur to form the business, obtain qualifying
levels of investor financing (which may occur in several rounds) or
government grants or awards, and still meet the definition of a
``start-up entity'' under this rule.
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\25\ With respect to certain proposed definitions at 8 CFR
212.19(a)(3) and (a)(5), which discuss other entities that receive
grants, awards, or investments, an entity may be considered recently
formed if it was created within the 3 years immediately preceding
the receipt of a relevant grant, award, or investment. See proposed
8 CFR 212.19(a)(2).
\26\ U.S. Small Business Administration, Startups & High Growth
Businesses, available at https://www.sba.gov/content/startups-high-growth-businesses (``In the world of business, the word `startup'
goes beyond a company just getting off the ground.'').
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[[Page 60138]]
DHS further proposes to consider parole under this rule only where
it is demonstrated that the start-up entity has been operating lawfully
in the United States since its formation. See proposed 8 CFR
212.19(a)(2). This limitation is intended to protect the integrity of
this new parole process. Part of the parole determination would
therefore include a review by DHS of the start-up entity's activities
from the time of its formation in the United States.
Finally, DHS proposes that the start-up entity must be of a type
that has the substantial potential to experience rapid growth and job
creation, including through the significant attraction of capital
investment or government awards or grants. This factor is intended to
capture the types of start-up entities that are most likely to provide
a significant public benefit, while excluding entities without such
potential--such as small businesses with limited growth potential
created by entrepreneurs for the sole or primary purpose of providing
income to the entrepreneurs and their families.\27\ Because this latter
type of business is less likely to experience rapid growth and job
creation, DHS believes it is unlikely that the entrepreneur of such a
business would be able to meet the significant public benefit
requirement for a grant of parole.
---------------------------------------------------------------------------
\27\ Erik Hurst & Benjamin Wild Pugsley, ``What Do Small
Businesses Do?'' (Aug. 2011), available at http://www.brookings.edu/
~/media/files/programs/es/bpea/2011_fall_bpea_papers/
2011_fall_bpea_conference_hurst.pdf.
---------------------------------------------------------------------------
DHS anticipates that an applicant seeking parole under this rule
would be able to meet the above criteria by providing various types of
evidence. As part of the application process, an applicant would
generally be expected to submit supporting documentation concerning the
entity's business and its substantial potential for rapid growth and
job creation (as well as the entrepreneur's day-to-day role in the
business). See proposed 8 CFR 212.19(b)(2)(ii)(A). In addition to
meeting the capital investment or government funding criteria discussed
further below, such additional documentation may include:
Evidence of capital investments from qualified
investors, or government awards or grants, other than those relied
on to satisfy the requirements of 8 CFR 212.19(b)(2)(ii)(B);
letters from relevant government entities, qualified
investors, or established business associations with knowledge of
the entity's research, products or services and/or the applicant's
knowledge, skills or experience that would advance the entity's
business;
newspaper articles or other similar evidence that the
applicant or entity has received significant attention or
recognition;
evidence that the applicant or entity has been recently
invited to participate in, is currently participating in, or has
graduated from one or more established and reputable start-up
accelerators;
evidence of significant revenue generation and growth
in revenue;
patent awards or other documents indicating that the
entity or applicant is focused on developing new technologies or
cutting-edge research;
evidence that the applicant has played an active and
central role in the success of prior start-up entities;
degrees or other documentation indicating that the
applicant has knowledge, skills, or experience that would
significantly advance the entity's business;
payroll, bookkeeping, salary, or bank records or other
documents related to jobs created prior to filing the request for
parole; and
any other relevant, probative, and credible evidence
indicating the entity's potential for growth and/or the applicant's
ability to advance the entity's business in the United States.
DHS believes that such evidence would assist USCIS officers in
determining whether an entity has substantial potential for rapid
growth and job creation and, ultimately, whether an applicant has met
the required standard for parole and merits a favorable exercise of
discretion.
DHS welcomes public comment on the proposed definitions of the
terms ``start-up entity'' and ``U.S. business entity,'' as well as the
requirement that the entity be formed within the 3 years preceding a
request for parole. DHS also welcomes comments on the types of evidence
that may be considered when determining whether such provisions have
been met, including alternative suggestions on how applicants may be
able to demonstrate eligibility.
2. Applicant Is an Entrepreneur Who Is Well-Positioned To Advance the
Entity's Business
DHS is proposing that to be considered for parole under this rule,
an applicant must be an entrepreneur who is well-positioned to advance
his or her start-up entity's business. Specifically, DHS proposes that
an applicant be able to demonstrate that he or she is an
``entrepreneur'' as defined at 8 CFR 212.19(a)(1). This definition
would require the applicant to show that he or she both: (1) Possesses
a substantial ownership interest in the start-up entity, and (2) has a
central and active role in the operations of that entity, such that his
or her knowledge, skills, or experience will substantially assist the
entity with the growth and success of its business. See proposed 8 CFR
212.19(a)(1). The definition further provides that for purposes of this
rule, an individual may be considered to possess a substantial
ownership interest if he or she possesses at least a 15 percent
ownership stake in the start-up entity at the time of adjudication of
the initial grant of parole (and maintains at least a 10 percent
ownership stake in the start-up entity at all times during the parole
period, including any period of re-parole). Id.
DHS believes these criteria are appropriate, as active ownership
and participation provide stronger justifications for parole based on
significant public benefit than investment alone. To establish that
parole would serve a significant public benefit, DHS believes that the
applicant should be central to the entity's business and well-
positioned to actively assist in the growth of that business, such that
his or her presence would help the entity provide related benefits in
the United States, including by conducting research and development,
increasing revenue, or creating jobs. DHS thus adopts the common
meaning of the term ``entrepreneur,'' which embodies the concept of
active, material participation by an individual in the operations and
growth of a new business entity. See Black's Law Dictionary (9th ed.
2009) (defining ``entrepreneur'' as ``[o]ne who initiates and assumes
the financial risks of a new enterprise and who usually undertakes its
management''). Whether an applicant has an ``active and central role''
will be determined based on the totality of the evidence provided.
The ownership criterion proposed by DHS in this rule is also
essential for connecting the individual to the start-up entity
providing the significant public benefit. DHS has determined that a
minimum 15 percent ownership interest is a reasonable threshold for
seeking parole under this rule. DHS recognizes that entrepreneurs may
possess larger equity stakes in the start-up entity at the time of
formation or during initial seed rounds of financing (often ranging
from 50-100 percent).\28\ This equity stake, however, may be diluted
significantly during financing rounds, or by the provision of equity
compensation to key
[[Page 60139]]
personnel within the entity. DHS further recognizes that start-up
entities are not limited to one entrepreneur, and that there may be
instances when a team of entrepreneurs will form the start-up entity.
The specific equity stake by the entrepreneur in the start-up entity
will therefore vary based on the particular facts and circumstances of
each case. DHS thus believes establishing a minimum 15 percent
threshold with respect to ownership adequately accounts for the
possibility of equity dilution for the reasons described above, while
ensuring that the individual continues to have a substantial ownership
interest in, and assumes more than a nominal financial risk related to,
the entity.
---------------------------------------------------------------------------
\28\ ``Venture Capital,'' Encyclopedia of Small Business, 2007.
Retrieved September 22, 2015 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2687200596.html (``The percentage of
equity ownership required by a venture capital firm can range from
10 percent to 80 percent, depending on the amount of capital
provided and the anticipated return. But most venture capital
organizations want to secure equity in the 30-50 percent range so
that the small business owners still have an incentive to grow the
business. Since venture capital is in effect an investment in a
small business' management team, the venture capitalists usually
want to leave management with some control.'').
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DHS anticipates that an applicant would be able to demonstrate
sufficient satisfaction of the above criteria by providing various
forms of evidence. With respect to ownership, DHS anticipates that an
applicant would be able to provide copies of legal or financial
documents--such as formation and organizational documents, equity
certificates, equity ledgers, ownership schedules, or capitalization
tables--indicating the applicant's ownership interest in the start-up
entity. With respect to the applicant's role within the entity, DHS
expects that an applicant would provide supporting documentation of his
or her role within the entity, as well as the knowledge and experience
that is central to the entity's business. Such supporting documentation
may include:
Letters from relevant government agencies, qualified
investors, or established business associations with an
understanding of the applicant's knowledge, skills or experience
that would advance the entity's business;
newspaper articles or other similar evidence that the
applicant has received significant attention and recognition;
evidence that the applicant or entity has been recently
invited to participate in, is currently participating in, or has
graduated from one or more established and reputable start-up
accelerators;
evidence that the applicant has played an active and
central role in the success of prior start-up entities;
degrees or other documentation indicating that the
applicant has knowledge, skills, or experience that would
significantly advance the entity's business; and
any other relevant, probative, and credible evidence
indicating the applicant's ability to advance the entity's business
in the United States.
DHS welcomes public comments on all aspects of these standards,
including the definition of the term ``entrepreneur.'' DHS also
welcomes comment on the types of evidence that may be considered when
determining whether an applicant is an entrepreneur, including
alternative suggestions on how applicants may be able to demonstrate
eligibility.
3. Capital Investment or Government Funding Criteria
DHS is also proposing that an individual who seeks parole under
this rule must validate the entity's substantial potential for rapid
growth and job creation by providing additional reliable evidence of
such potential. DHS is proposing that this requirement may generally be
satisfied by demonstrating that the entity has: (1) Received
substantial investment of capital from U.S. investors with established
records of successful investments; or (2) received substantial awards
or grants for purposes of economic development, research and
development, or job creation from Federal, State, or local government
entities that regularly provide such awards or grants to U.S.
businesses. See proposed 8 CFR 212.19(b)(2)(ii)(B). DHS further
proposes alternative criteria under which an applicant who partially
meets one or more of these two criteria may be considered for parole
under this rule if he or she provides additional reliable and
compelling evidence that his or her parole would provide a significant
public benefit. See proposed 8 CFR 212.19(b)(2)(iii).
These investment and funding criteria are proposed to serve as
reliable indicators of an entity's substantial potential for rapid
growth and job creation and, ultimately, of the significant public
benefit that a grant of parole would provide in an individual case.
Meeting these criteria, however, is intended to supplement--and not
supplant--the need to provide other supporting evidence (such as that
described in section IV.B.1) establishing that the applicant meets the
general criteria for a grant of parole under the proposed rule. Even if
an entity meets the investment or funding criteria discussed herein,
additional evidence would generally assist USCIS officers in
determining whether an applicant has met the required standard for
parole and merits a favorable exercise of discretion. Among other
things, such supplementary evidence may: provide additional external
validation of the start-up entity (e.g., receiving additional funding
from a government entity, being accepted into a start-up accelerator,
generating significant revenue, or creating jobs); show that the entity
works in fields important to economic growth (e.g., creating new
technologies or engaging in cutting-edge research); or demonstrate that
the entrepreneur has knowledge, skills, or experience that would
substantially advance the entity's business (e.g., successfully leading
prior start-up entities, having advanced degrees in the appropriate
field, or establishing critical patents). DHS also anticipates that
such additional evidence would be available in the majority of cases
involving recently formed entities that have substantial potential for
growth and that otherwise meet the standards proposed in this
rulemaking.
a. Substantial Investment From Qualified U.S. Investors
DHS proposes to allow an applicant to demonstrate his or her
entity's substantial potential for rapid growth and job creation by
showing that the entity has received substantial investment of capital
from established U.S. investors (such as venture capital firms, angel
investors, or start-up accelerators) with a history of successful
investments in start-up entities. See proposed 8 CFR
212.19(b)(2)(ii)(B). DHS proposes that investments may generally be
considered ``substantial'' with respect to an initial application for
entrepreneur parole if total investments, which can be from one or more
qualified U.S. investors, meet or exceed $345,000. Id. DHS further
proposes that qualifying investors include only those investors who
have a history of making similar or greater investments on a regular
basis over the last 5 years and who can demonstrate that at least two
of the entities receiving such investments have subsequently
experienced significant growth in revenue or job creation. See proposed
8 CFR 212.19(a)(5). DHS believes that the investment of a substantial
amount of capital by qualified investors in an entrepreneur's start-up
entity may serve as a strong indication of an entity's potential to
positively impact the U.S. economy and labor force.
DHS is proposing a general qualified investment threshold of
$345,000, which DHS believes is a reasonable minimum investment amount
that will serve as a reliable external validation factor by qualified
investors.\29\ DHS
[[Page 60140]]
reached this figure after analyzing available data on angel
investments--the largest source of start-up capital for innovative
firms--as well as initial or ``seed'' round investments from venture
capital firms and start-up accelerators.\30\ DHS also analyzed other
available data on capital amounts used to create new businesses, and
consulted with the Small Business Administration (SBA). In determining
a minimum investment amount applicable to all qualified investors
(e.g., venture capital firms,\31\ angel investors,\32\ and start-up
accelerators \33\), the $345,000 amount is generally on par with, based
on data that DHS reviewed, the combined capital investment typically
obtained in early rounds of investment from venture capital firms or
angel investors.\34\
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\29\ The $345,000 figure is rounded from the actual figure
$345,390, which is the 2015 average for all angel investments (the
largest source of start-up capital for innovative firms) received by
start-up entities. See Jeffrey Sohl, ``The Angel Investor Market in
2015: A Buyers' Market,'' Center for Venture Research, May 25, 2015,
available at: https://paulcollege.unh.edu/sites/paulcollege.unh.edu/files/webform/Full%20Year%202015%20Analysis%20Report.pdf. The
rounded $345,000 figure from 2015 is also very close to the $342,000
grand mean for the period 2012-2015, id., and it is corroborated by
other sources. For example, according to a report from the business
Web site Fundable, which specializes in startup finance, the average
angel-financed firm receives approximately $333,000 in angel
capital. This report can be found at: https://www.fundable.com/learn/resources/guides/investor-guide/types-of-investors.
\30\ DHS is aware that there is a wide range of investment
amounts for angel, venture, and accelerator investment applied to
startups. For example, DHS analysis of data from SeedDB reveals that
some large accelerators provide initial investments of less than
$100,000. DHS analysis reveals that angel investments that are
conducted in groups, or that are co-invested with venture or other
institutional investors, have ranged from about $350,000 to $725,000
since 2013, with an up-trend over the last two years, and several
data sources reveal medians of about $500,000. Seed and startup
venture investments are generally over $1,000,000. DHS believes that
the $345,000 angel average for 2015 is reasonable because it
represents nearly a mid-point across the various data and sources
DHS has reviewed for such investments, is publicly available from a
reputable source, and includes all angel investments. Additional
details on the Seed DB accelerators data are found in Section C,
``An Alternative Estimate of Entrepreneurs Based on Investment
Structures,'' in the ensuing ``Statutory and Regulatory
Requirements'' section of this notice. Mean and median figures for
venture backed and angel group can be found in the following
sources: http://www.ey.com/Publication/vwLUAssets/
Venture_Capital_Insights_4Q14_-_January_2015/$FILE/ey-venture-
capital-insights-4Q14.pdf; http://www.angelresourceinstitute.org/~/
media/Files/Halo%20Report%202015%20Annual%20vFinal.pdf; and http://www.inc.com/linkedin/tomasz-tunguz/inflation-deflation-startup-fundraising-market-tomasz-tunguz.html.
\31\ Government, semi-government, or private firm that provides
startup or growth equity capital and/or loan capital to promising
ventures for returns that are higher than market interest rates. See
http://www.businessdictionary.com/definition/venture-capital-firm.html.
\32\ Business ``angels'' are high net worth individual investors
who seek high returns through private investments in start-up
companies. See https://www.sba.gov/content/venture-capital#Angel
Investors.
\33\ Business entities that make seed-stage investments in
promising companies in exchange for equity as part of a fixed-term,
cohort-based program, including mentorship and educational
components, that culminates in a public pitch event or demo day. See
https://www.sba.gov/advocacy/innovation-accelerators-defining-characteristics-among-startup-assistance-organizations.
\34\ See note 29.
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DHS is also proposing a requirement that the substantial investment
be received within the 365 days immediately preceding the filing of the
application for initial parole. In addition to addressing potential
fraud concerns, this requirement assists in validating the entity's
substantial potential for rapid growth and job creation and,
ultimately, of the significant public benefit that a grant of parole to
the entrepreneur would provide. This requirement ensures that a
qualified investor or government entity has recently validated (within
365 days) the start-up entity's potential for rapid growth and job
creation. However, DHS recognizes that start-up investment is a rapidly
evolving field, and welcomes additional feedback, including data on
trends in investment that may be available, as such feedback and data
may impact the minimum investment threshold in the Department's final
rule.
As noted above, in order to meet the investment criteria for
consideration of parole under this proposed rule, the $345,000 total
investment must be made by one or more qualified U.S. investors. See
proposed 8 CFR 212.19(a)(5) and (b)(2)(ii)(B)(1). DHS proposes to
define ``qualified investor'' as either an individual or an
organization. See proposed 8 CFR 212.19(a)(5). If the investor is an
individual, the investor would need to be a U.S. citizen or lawful
permanent resident. Id. If the investor is an organization, the
investor would need to be located in the United States and operate
through a legal entity organized under the laws of the United States
that is majority owned and controlled, directly or indirectly, by U.S.
citizens or lawful permanent residents. Id. In either case, such
investor could not have been permanently or temporarily enjoined from
participating in the offer or sale of a security or in the provision of
services as an investment adviser, broker, dealer, municipal securities
dealer, government securities broker, government securities dealer,
bank, transfer agent or credit rating agency, barred from association
with any entity involved in the offer or sale of securities or
provision of such services, or otherwise found to have participated in
the offer or sale of securities or provision of such services in
violation of law. See proposed 8 CFR 212.19(a)(5).
In addition, DHS proposes to limit qualifying investors to those
who have an established record of successful investments in start-up
entities. DHS proposes that such a record would include, during the 5-
year period prior to the date of filing of the parole application, 1 or
more investments in other start-up entities in at least 3 separate
calendar years in exchange for equity or convertible debt comprising a
total of no less than $1,000,000.\35\ See proposed 8 CFR
212.19(a)(5)(i). DHS will require monetary commitments, rather than
non-monetary commitments such as credit for in-kind value (e.g., credit
for services), given the difficulty of valuing such commitments and the
potential for fraud and abuse. The applicant would also need to show
that, subsequent to such investment by the investor, at least 2 such
entities each created at least 5 qualified jobs or achieved at least
$500,000 in revenue with average annualized revenue growth of at least
20 percent. See proposed 8 CFR 212.19(a)(5)(ii).
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\35\ ``Venture Capital,'' Encyclopedia of Small Business, 2007.
Retrieved September 22, 2015 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2687200596.html (``Most venture capital
firms look for investment opportunities in the $250,000 to $2
million range.'')
---------------------------------------------------------------------------
These criteria are intended to ensure that investors are bona fide,
and thus to prevent fraud and protect the integrity of the parole
process under this rule. They are also intended to ensure that a
qualifying investment serves as a strong and reliable indication of the
start-up entity's substantial potential for rapid growth and job
creation. By requiring an investor to have a track record of investing
substantial funds in start-up entities that subsequently achieve
significant revenue and job creation, these provisions would enhance
the Department's ability to have confidence in the investments made by
qualified investors as reliable validation of a start-up entity's
potential. At the same time, the criteria would mitigate potential
misuse of the parole process, including by individuals or entities that
may claim to be bona fide investors to conceal fraud or other illicit
activity. DHS expects that individuals and entities that meet these
criteria would include existing and bona fide start-up investors that
are known to operate successfully in the business community--including
established venture capital firms, angel investors, and start-up
accelerators.
Finally, DHS proposes to limit ``qualified investments'' under this
rule to investments of lawfully derived capital in start-up entities
through the purchase of equity or convertible debt issued by such
entities. See proposed 8 CFR 212.19(a)(4). DHS proposes that a
qualified investment would not include an investment from: (1) The
entrepreneur him or herself; (2) the
[[Page 60141]]
parents, spouse, brother, sister, son, or daughter of such
entrepreneur; or (3) any corporation, limited liability company,
partnership, or other entity in which such entrepreneur or the parents,
spouse, brother, sister, son, or daughter of such entrepreneur directly
or indirectly has any ownership interest. Id. DHS is proposing these
exclusions to help ensure that the qualified investment was acquired
through an arms-length transaction and is a bona fide investment. Any
investment that does not meet the definition of ``qualified
investment'' will not count toward the criteria to meet the proposed
rule's minimum investment threshold.
DHS welcomes comments on all aspects of this section, including the
proposed investment threshold, any potential alternative amounts for
that threshold, and additional data. For comments recommending
investment threshold amounts, the Department requests that commenters
provide rationales and data, if available, to support their
recommendations.
b. Substantial Government Awards or Grants
DHS proposes that an applicant may alternatively demonstrate a
start-up entity's substantial potential for rapid growth and job
creation by showing that the entity has received significant funding in
the form of awards or grants from Federal, State or local government
entities. DHS proposes that to satisfy this criterion, the awards or
grants generally would need to be made by one or more Federal, State,
or local government entities that regularly provide such funding to
U.S. businesses for economic development, innovation, research and
development, or job creation reasons. DHS proposes to exclude any
contractual commitment for goods or services, including any contracts
that might appear to be, or could be made to look like, an award or
grant. DHS believes this exclusion is reasonable since a contract for
goods and services with a Federal, State or local government entity
would typically provide a direct benefit to that government entity and
not a public benefit, such as encouraging economic development and
innovation, that an award or grant would provide as required by this
proposed rule. See proposed 8 CFR 212.19(a)(3). DHS also proposes that
to be considered substantial, such awards or grants generally would
need to total $100,000 or more. See proposed 8 CFR
212.19(b)(2)(ii)(B)(2).
In the United States today, a range of Federal, State, and local
government entities, including State or local economic development
corporations (EDCs), evaluate U.S. businesses and provide awards or
grants when such funding is deemed to be in the public interest.\36\
DHS believes that significant funding from such a government entity is
a strong indicator of a start-up entity's substantial potential for
rapid growth, including through enhancing innovation, generating
revenue, obtaining significant additional investments of capital, and
creating jobs. Because such government entities regularly evaluate the
potential of U.S. businesses, the choice to provide a significant award
or grant to a particular start-up entity is generally a compelling
indicator of that start-up's substantial potential for growth and job
creation. Additionally, because government entities are by definition
formed to serve the public, the choice by such an entity to fund a
particular business generally indicates the government entity's
independent assessment that the business's operations would provide a
significant public benefit. For these reasons, DHS believes it is
reasonable to establish a lower threshold amount for government funding
in comparison to the previously discussed threshold amount for private
investment. DHS proposes a general $100,000 minimum government funding
threshold based on the above and the fact that seed capital awards
(``Phase I'' awards) from the Small Business Innovation Research (SBIR)
program are generally below $150,000.\37\
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\36\ See, e.g., U.S. Small Business Administration, https://www.sbir.gov (describing Small Business Innovation Research (SBIR)
and Small Business Technology Transfer (STTR) programs, which
provide early-stage capital for innovative small companies in the
United States) and National Institutes of Health, https://sbir.nih.gov/ (describing healthcare opportunities under SBIR and
STTR); U.S. Economic Development Association (EDA), Regional
Innovation Strategies Program (RIS), http://www.eda.gov/oie/ris/
(providing grants to cities and local EDCs, among others, to fund
startups); Energy Innovations Small Grant Program,
www.energy.ca.gov/research/innovations (providing State grants of up
to $150,000 to small businesses, among others, to research
innovative energy concepts); Startup Philadelphia Call for Ideas,
http://www.startupphl.com/startup-phl-call-for-ideas (partnership
between City of Philadelphia and the Philadelphia Industrial
Development Corporation to provide $500,000 to grow the startup and
early-stage business economy in Philadelphia).
\37\ The Small Business Innovation Research (SBIR) program is
coordinated by the Small Business Administration to seed capital for
start-up businesses. It is designed to stimulate technological
innovation among small private-sector businesses and encourages
small businesses to market the SBIR technology in the private
sector. It is the largest source of seed capital in the United
States for technology driven start-ups, funding between 5,000 and
7,000 projects a year. The ``first phase'' award is an innovation
grant made for initial eligibility and corresponds to the start-up
of the commercial business and proof of ``concept phase''--the
average award amounts vary by department, but most SBIR Phase I
awards are made at or below $150,000. The Phase I awards are geared
towards financing the startup of the private commercial entity and
also the innovation and research and development (R&D) that the
enterprise undertakes.
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DHS welcomes comments on all aspects of this section, including the
proposed government funding threshold, any potential alternative
amounts for that threshold, and additional data. For comments
recommending government funding threshold amounts, the Department
requests that commenters provide rationales and data, if available, to
support their recommendations.
c. Alternative Criteria for Parole Consideration
Additionally, DHS proposes that an applicant who only partially
meets one or both of the above investment or government funding sub-
criteria for parole under this rule may still be considered for parole
under this rule in certain limited circumstances. See proposed 8 CFR
212.19(b)(2)(iii). Specifically, DHS would consider parole for such an
applicant if the applicant provides additional ``reliable and
compelling'' evidence of the entity's substantial potential for rapid
growth and job creation. See proposed 8 CFR 212.19(b)(2)(iii).
Importantly, such parole would not be available to applicants who are
unable to demonstrate that their start-up entities have received a
substantial amount of U.S. capital investment or government funding.
Rather, the applicant would need to show as a preliminary matter that
his or her entity has received a substantial level of capital
investment or government funding, although less than $345,000 or
$100,000, respectively. The applicant would also need to further
validate the entity's substantial potential for rapid growth and job
creation by submitting additional evidence that DHS determines to be
both reliable and compelling. DHS proposes that such evidence be
reliable and compelling in its own right to overcome the applicant's
inability to fully meet the threshold criteria otherwise required under
the proposed rule.
DHS is not proposing to define the specific types of evidence that
may be deemed ``reliable and compelling'' at this time, as the
Department seeks to retain flexibility as to the kinds of supporting
evidence that may warrant the Secretary's exercise of discretion in
granting parole based on significant public benefit. But DHS believes
that to meet the parole standard in this context without meeting the
threshold criteria,
[[Page 60142]]
such additional evidence would need to be particularly persuasive. In
other words, although all applicants for entrepreneur parole would be
expected to provide supplementary evidence indicating that their parole
would serve a significant public benefit, applicants who only partially
meet the threshold criteria mentioned above would need to provide other
reliable and compelling evidence to ensure that the totality of the
evidence demonstrates that the start-up entity has the substantial
potential for rapid growth and job creation.
DHS anticipates that the necessary amount and requisite evidentiary
weight of such additional evidence would depend on the degree to which
an applicant meets one or both of the threshold sub-criteria related to
capital investment or government funding. For example, an applicant
whose entity has received $200,000 in qualifying capital investment
would be expected to provide more validating evidence than an applicant
whose entity received $300,000 in such investment. Moreover, DHS may
give particular weight to evidence that tends to serve as a strong
validation of the entity's substantial potential for rapid growth and
job creation. For example, evidence that an entity has been selected to
participate in, is participating in, or has graduated from one or more
established and reputable start-up accelerators (or incubators) may
serve as, depending on the accelerator's success rate and other
factors, a strong indicator of the entity's potential. With respect to
start-up accelerators, DHS expects to evaluate them on several relevant
factors, including years in existence, graduation rates, significant
exits by portfolio start-ups, significant investment or fundraising by
portfolio start-ups, and valuation of portfolio start-ups.
Ultimately, the USCIS adjudicator would be required to determine
whether such additional evidence--in conjunction with the entity's
substantial capital investment or government funding, among other
factors--is sufficient to establish that the applicant's parole into
the United States will provide a significant public benefit (and that
the applicant merits a favorable exercise of discretion). This approach
is consistent with the discretionary nature of the Secretary's
statutory parole authority and the fact that each parole request will
be adjudicated, on a case-by-case basis, after considering the
particularized facts of each case. DHS invites public comment on the
types of reliable and compelling evidence that may warrant a
discretionary grant of parole in such cases.
As noted above, DHS also invites public comment on alternatives to
the proposed investment amount and government funding thresholds that
applicants may use to demonstrate a start-up entity's substantial
potential for rapid growth and job creation and that may serve as a
principal basis for seeking parole under this rule. Commenters are
invited to submit comments on whether significant revenue generation,
participation in established and reputable start-up accelerators, or
any other significant external validation factor should be included as
a principal basis for seeking parole under this rule. DHS specifically
invites comment on whether applicants can adequately demonstrate the
future substantial potential for rapid growth and job creation through
established records of revenue generation, revenue growth, job
creation, or any combination of these and other factors. Commenters
should recommend threshold levels for obtaining parole under suggested
criteria, data to support the recommended alternative thresholds, and
the types of reliable evidence that applicants may submit to
substantiate their claims. Comments should include any relevant data to
substantiate recommendations, if available.
C. Application Requirements for Initial Period of Parole
1. Filing the Application for Entrepreneur Parole (Form I-941)
DHS is proposing to establish new application requirements for
entrepreneurs seeking parole under this rule. Prior to appearing before
DHS as an applicant for admission requesting parole, entrepreneurs
would be required to file with USCIS an Application for Entrepreneur
Parole (Form I-941 or successor form), established by this rulemaking,
along with supporting documentation. This application is designed to
capture information pertaining to the criteria that are specific to
parole requests filed under this rule. USCIS would accept Applications
for Entrepreneur Parole filed from within the United States or outside
the United States. DHS is proposing an application filing fee of $1200.
See proposed 8 CFR 103.7(b)(1)(i)(FFF). In addition to filing the
application, supporting documentation, and filing fee, applicants would
be required to submit a biometric services fee as prescribed by 8 CFR
103.7(b)(1)(i)(C).
2. Requirement To Appear for Submission of Biometric Information
DHS proposes that all individuals filing the Application for
Entrepreneur Parole would be required to appear for collection of their
biometric information, including fingerprints and photographs. See
proposed 8 CFR 212.19(e). DHS is proposing a biometric collection
requirement so that background checks can be completed for each
applicant, and so that any necessary travel documents can be produced.
As noted above, applicants would be required to pay the fee for
biometric services at the time of filing the Application for
Entrepreneur Parole.
As is currently the case for other applicants for parole, the
location for the collection of biometric information will depend on
whether the applicant filed the application from within the United
States or outside the United States. See form instructions to
Application for Entrepreneur Parole (Form I-941). Applicants applying
from within the United States will be required to appear at a USCIS
Application Support Center (ASC) for submission of biometrics.
Applicants applying from outside the United States may be required to
appear at an overseas USCIS office. Applicants who will be receiving
their travel documents overseas from a Department of State Consulate
(or Embassy) will have their biometrics taken after their parole is
authorized, but before their travel document is issued. Under current
DHS regulations, DHS may determine that an application has been
abandoned and thus should be denied if the applicant fails to appear at
the biometrics appointment or otherwise fails to provide required
biometric information. See 8 CFR 103.2(b)(13)(ii).
3. Income-Related Condition on Parole
Under the process proposed by this rule, DHS would consider
granting parole to individuals whose enterprises have the substantial
potential for rapid growth and job creation, including through the
development of new technologies or the pursuit of cutting-edge
research. To further ensure this is the case, and in addition to the
high threshold criteria discussed above, DHS is proposing that an
individual who is paroled into the United States under this rule must,
as a condition of that parole, maintain household income while in the
United States that is greater than 400 percent of the Federal poverty
line for his or her household size as defined by the Department of
Health and Human Services (HHS). See proposed 8 CFR 212.19(i). DHS is
[[Page 60143]]
further proposing to require the applicant to attest, as part of the
Application for Entrepreneur Parole, that he or she will maintain
household income at this level as a condition of parole and to provide
evidence that he or she satisfied this condition if applying for re-
parole. Id.
This income threshold is intended to establish that applicants
seeking parole under this rule will have sufficient personal economic
stability so as to better ensure that they will make significant
economic and related contributions to the United States. The income
threshold and time limits on parole also mean that individuals eligible
for parole under this rule would generally not be eligible for Federal
public benefits or premium tax credits under the Health Insurance
Marketplace of the Affordable Care Act.\38\ Under the proposed rule,
DHS would be authorized to terminate parole for any individual who
fails to maintain the threshold income level. See proposed new 8 CFR
212.19(k)(3)(iv). DHS would request verification of the parolee's
household income when the parolee applies for re-parole, if applicable,
or subsequent to any material change notification submitted by the
parolee to USCIS.
---------------------------------------------------------------------------
\38\ Although individuals who are granted parole for more than
one year become ``qualified aliens'' for the purpose of applying for
such benefits, see 8 U.S.C. 1641(b), such individuals must generally
be ``qualified aliens'' for at least 5 years before becoming
eligible for those benefits, see 8 U.S.C. 1613. Individuals paroled
under this rule will thus generally not qualify for such benefits.
---------------------------------------------------------------------------
DHS welcomes comment on the proposed income threshold.
4. Adjudication of Applications
When adjudicating the Application for Entrepreneur Parole, DHS is
proposing that USCIS will examine whether the entrepreneur has
demonstrated, through credible and probative evidence, that he or she
warrants a favorable exercise of the Secretary's discretion. See
proposed new 8 CFR 212.19(d)(1). If the entrepreneur meets the criteria
for parole under the proposed rule, and a favorable exercise of
discretion is warranted, USCIS may approve the request for parole. Id.
Moreover, in determining whether an individual applicant's parole would
provide a significant public benefit and whether to favorably exercise
the Secretary's discretion in that individual case, USCIS will consider
and weigh all evidence, including any derogatory evidence or
information, such as but not limited to evidence of criminal history or
other adverse factors. Id.
If USCIS, in its discretion, determines that the applicant does not
warrant a grant of parole under the proposed rule, it may deny the
application. See proposed 8 CFR 212.19(b) and (c). DHS is also
proposing that there would be no right of appeal following a decision
to deny entrepreneur parole, just as is the case currently with other
parole requests. See proposed 8 CFR 212.19(d)(4). DHS is also proposing
that applicants be precluded from filing motions to reopen or
reconsideration under 8 CFR 103.5(a)(1). Id.
DHS, however, proposes to retain its authority and discretion to
reopen or reconsider a decision only on its own motion. See proposed 8
CFR 212.19(d)(4). For the parole process proposed in this rulemaking,
DHS may, in its discretion, reopen a decision and deny or approve
parole at any time if DHS finds that the decision was issued in error.
If USCIS determines that approval of an Application for Entrepreneur
Parole was made in error, parole may be revoked. DHS would follow the
requirements of 8 CFR 103.5(a)(5) before reopening a case and denying a
parole application.
Because the determination to grant or deny a request for parole is
a discretionary determination, the parole process proposed in this rule
may not be relied upon to create any right or benefit, substantive or
procedural, enforceable at law or by any individual or other party in
removal proceedings, in litigation with the United States, or in any
other form or manner. Parole determinations would continue to be
discretionary, case-by-case determinations made by DHS, and parole may
be revoked or terminated at any time. Parolees under this proposal
would assume sole risk for any and all costs, expenses, opportunity
costs, and any other potential liability resulting from a revocation or
termination of parole. A grant of parole would in no way create any
reliance or due process interest in obtaining or maintaining parole or
being able to remain in the United States to continue to direct a
start-up entity or for other reasons.
5. Limitation on Number of Entrepreneur Parolees per Start-Up Entity
DHS proposes to limit the number of entrepreneurs who may be
granted parole under this rule with the same start-up entity. DHS
recognizes that a start-up entity may be developed by more than one
entrepreneur. DHS also believes that it would be difficult for a large
number of entrepreneurs associated with the same start-up entity to
each meet the proposed criteria and comply with the proposed conditions
while ultimately developing a successful business in the United States.
DHS therefore believes that imposing a limit on the number of
entrepreneurs who may be granted parole based on the same start-up
entity is consistent with ensuring that each entrepreneur's parole will
provide a significant public benefit. Specifically, DHS is proposing
that parole may be granted to no more than 3 entrepreneurs per start-up
entity. See proposed 8 CFR 212.19(f).
This limitation is intended to strengthen the integrity of the
proposed entrepreneur parole process in various ways. Among other
things, limiting the number of individuals who may be granted parole
under this rule with respect to the same start-up entity will be an
additional means of preventing an entity from being used as a means to
fraudulently allow individuals to enter the United States. Such a
limit, for example, diminishes the incentive to dilute equity in the
start-up entity as a means to fraudulently acquire parole for
individuals who are not bona fide entrepreneurs. Such a limit will also
help ensure that the tangible benefits that may flow from the start-up
entity's success in the United States--such as rapid revenue generation
and job creation--are more likely to inure to the United States and its
workers. Relatedly, DHS is concerned that a higher number of
entrepreneurs associated with the same start-up entity may affect the
start-up's ability to grow and succeed, and may even result in the
startup's failure, thus preventing the goals of the proposed parole
process.\39\ To facilitate this determination, DHS is proposing to
require an applicant to provide information on the application about
any other individuals who have applied for or been granted parole based
on the same start-up entity.
---------------------------------------------------------------------------
\39\ Scaling Startup Genome Report: premature scaling v 1.2
(edited March 2012). Copyright 2011, Startup Genome Report Extra on
Premature, Max Marmer, CSO Startup Genome, Bjoern Lasse Herrmann,
CEO Startup Genome, Ertan Dogrultan, CTO Startup Genome, Ron Berman,
Ph.D. at UC Berkeley (explaining that ``hiring too many people too
early'' in a start-up's development is one of several reasons that
most start-ups fail) available at https://s3.amazonaws.com/startupcompass-public/StartupGenomeReport2_Why_Startups_Fail_v2.pdf.
---------------------------------------------------------------------------
DHS welcomes comments on the proposed limitation on the number of
entrepreneurs who can qualify for parole under this rule with the same
start-up entity, including alternative proposals.
6. Authorized Period for Initial Grant of Entrepreneur Parole
DHS proposes that applicants who are granted entrepreneur parole
may be
[[Page 60144]]
authorized for an initial parole period of up to 2 years. See proposed
new 8 CFR 212.19(d)(2). DHS has determined that entrepreneurs paroled
under this rule may need up to a 2-year period of parole initially to
allow them sufficient time to develop their start-up entity, which
would be at an early stage of development, and achieve rapid growth in
terms of revenue generation and job creation. DHS further believes that
an initial period of parole of up to 2 years, followed by one possible
period of re-parole of up to 3 additional years as described below, is
consistent with the amount of time successful start-up entities
generally require to realize growth potential. An entrepreneur of a
start-up entity that is almost 3 years old when the parole application
is filed would have the possibility to obtain up to 5 years of parole,
which would allow the entity to realize its growth potential by the
time it is 8 years old.\40\ As proposed, DHS retains the discretion to
provide any length of parole to an applicant, including a period
shorter than 2 or 3 years where appropriate. Moreover, although USCIS
would designate an appropriate initial parole validity period upon
approval of the Application for Entrepreneur Parole, CBP would retain
the authority to deny parole to an applicant or to modify the length of
parole authorized by USCIS upon issuing parole at the port of entry,
consistent with CBP's discretion with respect to any advance
authorization of parole by USCIS. DHS will issue a multiple entry
travel document for individuals granted parole under this rule to
permit travel during their parole validity period.
---------------------------------------------------------------------------
\40\ Estimates based on the Census Bureau Business Dynamics
Statistics suggest that on average 55 percent of new firms survived
after 3 years, but 80 percent of the firms that survived 3 years
also made it through 5 years. Dane Stangler and Jared Konczal ``Give
me your entrepreneurs, your innovators: Estimating the Employment
Impact of a Startup Visa'', Ewing Marion Kauffman Foundation
(February 2013), available at http://www.kauffman.org/~/media/
kauffman_org/research%2Oreports%20and%20covers/2013/02/
startup_visa_impact_final.pdf; ``CrunchBase Reveals: The Average
Successful Startup Raises $41M, Exits at $242.9M,'' Techcrunch.com
(Dec. 14, 2013), available at http://techcrunch.com/2013/12/14/crunchbase-reveals-the-average-successful-startup-raises-41m-exits-at-242-9m/. See also TruBridge Capitol Partners, Why the `Next
Billion Dollar Startup' Is not Always the Next IPO, Forbes, Apr. 15,
2015, available at http://www.forbes.com/sites/truebridge/2015/04/15/why-next-billion-dollar-startup-not-always-next-ipo/ (``From
2001-2004, the average age of a company at its public exit was 5.4
years. . . . From 2009-2012, the average age was 7.9.'').
---------------------------------------------------------------------------
DHS welcomes public comment on the proposed limits on the duration
of parole under this rule and any relevant data to support alternative
durations of parole.
7. Spouses and Minor Children
DHS proposes that the spouse and children \41\ of an entrepreneur
granted parole under this proposed rule may also be granted parole for
the same period as the entrepreneur. See proposed new 8 CFR
212.19(h)(2). To be paroled with (or later join) the entrepreneur, his
or her spouse and children would each be required to file an
Application for Travel Document (Form I-131) in accordance with the
form instructions. Each spouse or child seeking parole must
independently establish eligibility for parole based on significant
public benefit (or, alternatively, for urgent humanitarian reasons),
and that the individual merits a favorable exercise of discretion. In a
case in which an entrepreneur has been granted parole based on
significant public benefit under this rule, USCIS may consider granting
parole to the entrepreneur's spouse and children, if any, to maintain
family unity and thereby further encourage the entrepreneur to operate
and grow his or her business in the United States. As with the
entrepreneur, certain biometric information for each spouse and child
must be included on the application, along with a biometric services
fee for each dependent. If the spouse and children are in the United
States, they would also be required to appear at a USCIS office within
the United States. If the applicants are outside the United States, the
collection of additional biometric information (fingerprints and
photographs) will take place prior to travel document issuance rather
than before the parole applications are adjudicated. In such cases,
however, USCIS would conduct preliminary background checks on each
accompanying or joining family member prior to making its discretionary
determination on their parole applications.
---------------------------------------------------------------------------
\41\ The terms ``child'' and ``children'' in this proposed rule
have the same meaning as they do under section 101(b)(1) of the INA,
8 U.S.C. 1101(b)(1) (defining a child as one who is unmarried and
under twenty-one years of age).
---------------------------------------------------------------------------
DHS is proposing to consider granting parole to the spouses and
children of entrepreneur parolees to further the central purpose of the
rulemaking--encouraging foreign entrepreneurs to come to and remain in
the United States to develop and grow their start-up entities and
provide the benefits of such growth to the United States. DHS retains
the authority to decide whether to grant parole to such spouses and
children on a case-by-case basis and may determine that such
individuals do not warrant parole (or re-parole) either because their
parole would not be justified on significant public benefit grounds or
as a matter of discretion.
D. Employment Authorization
1. Employment Authorization Incident to Parole With a Specific Employer
DHS is proposing that an entrepreneur who is paroled into the
United States under this rule would be authorized for employment
incident to his or her parole with the start-up entity. See proposed
new 8 CFR 212.19(g). Under the proposed rule, the entrepreneur
parolee's employment authorization would be limited to the specific
start-up entity listed on the Application for Entrepreneur Parole. This
limitation is intended to keep the scope of employment authorization
within the purposes for which parole was granted. As the purpose of
this proposed rule is to encourage foreign entrepreneurs to develop and
grow their start-up businesses in the United States--rather than obtain
new sources of employment--DHS believes this limitation on employment
authorization is a reasonable restriction.
DHS further proposes that such employment authorization be
``automatic'' upon the grant of parole so that the entrepreneur can
pursue his or her parole-related activities with the start-up entity
without delay. DHS believes that requiring entrepreneurs to file
separate applications for employment authorization and wait for
Employment Authorization Documents (EADs, Form I-766) before beginning
work \42\ would undermine the very basis for extending parole to
entrepreneurs--the rapid growth and success of the start-up entity. The
delay resulting from the need to apply for and receive EADs (up to 90
days or more) could be detrimental to the success of the start-up
entity.
---------------------------------------------------------------------------
\42\ This is the case with other parolees under existing
regulations. See 8 CFR 274a.12(c)(11).
---------------------------------------------------------------------------
Finally, DHS is proposing several conforming amendments to 8 CFR
274a.12(b), which lists the classes of foreign nationals authorized for
employment incident to status with specific employers. DHS proposes to
amend the introductory paragraph of this provision, which currently
refers only to employment-authorized ``nonimmigrants,'' by adding a
reference to parolees under this rule. See revised 8 CFR 274a.12(b).
DHS also proposes to add entrepreneur parolees under this rule to the
list of classes of individuals authorized only for employment with a
specific employer (as opposed to open market employment). See proposed
new 8 CFR 274a.12(b)(37). Specifically, the
[[Page 60145]]
amendment would provide that entrepreneurs paroled under this rule
would be employment authorized incident to their parole with their
start-up entities, pursuant to proposed new 8 CFR 212.19(g). DHS would
also assign a new code of admission for this class: ``PE-1.''
2. Employment Authorization Eligibility for Spouses
DHS is also proposing to extend eligibility for employment
authorization to the accompanying spouses (but not the children) of
entrepreneur parolees who have been paroled into the United States. See
proposed new 8 CFR 212.19(h)(3). Under the proposed rule, such spouses
who wish to obtain employment authorization would need to apply for an
EAD pursuant to 8 CFR 274a.12(c)(34), consistent with current parole
policy that allows parolees to apply for employment authorization. DHS
believes that allowing spouses of entrepreneurs to apply for work
authorization may alleviate a significant portion of the potential
economic burdens that entrepreneurs and their families may face, such
as paying for academic expenses for their children, and to ensure that
they satisfy the proposed condition on their parole that they maintain
household income that is greater than 400 percent of the Federal
poverty line, as they grow and develop their start-up entities.
Moreover, extending employment authorization to the spouse may further
incentivize a foreign entrepreneur to bring a start-up entity to the
United States rather than create it in another country.
DHS has proposed not to extend employment authorization to the
children of entrepreneurs, as it does not view the employment of these
children in the United States as a significant deciding factor for an
entrepreneur considering to create and develop start-up entities with
high growth potential in the United States. DHS has extended
eligibility for employment authorization to minors within the following
nonimmigrant categories: Dependents of Taipei Economic and Cultural
Representative Office (TECRO) E-1 nonimmigrants; J-2 dependent children
of J-1 exchange visitors; dependents of A-1 and A-2 foreign government
officials; dependents of G-1, G-3, and G-4 international organization
officials; and dependents of NATO officials. But in each of these
instances, DHS has extended eligibility for employment authorization to
minor children based on particular foreign policy considerations; these
underlying considerations are not present in the proposed entrepreneur
parole process.
3. Documentation for Employment Eligibility Verification (Form I-9)
As with other classes of aliens listed as employment authorized
incident to status with a specific employer in 8 CFR 274a.12(b),
entrepreneur parolees would not be issued EADs (Forms I-766) as
evidence of employment authorization. Instead, DHS would issue Arrival/
Departure Records (Forms I-94) with the entrepreneur's code of
admission (``PE-1''), which indicates that the entrepreneur is
employment-authorized incident to parole. Because the Arrival/Departure
Record would contain this code, the record would be sufficient evidence
of employment authorization for Employment Eligibility Verification
(Form I-9) purposes.
As with other employers, the start-up entity would be required to
verify the employment authorization of its employees, including the
entrepreneur paroled under this rule, to comply with employment
eligibility verification requirements. DHS is proposing to amend the
regulations governing these requirements by adding to the list of
documents acceptable by employers for completion of the Form I-9. The
proposed rule would add to this list a combination of the
entrepreneur's valid foreign passport and his or her Arrival/Departure
Record indicating employment-authorization pursuant to parole. See
proposed 8 CFR 274a.2(b)(1)(v)(A)(5).
This proposal would ensure that entrepreneur parolees under this
rule will have documentation evidencing identity and employment
authorization that is acceptable for meeting the Form I-9 requirements
immediately upon receiving parole to the United States. Because the
document combination described above (foreign passport and Arrival/
Departure Record) has been acceptable for Form I-9 purposes since the
Employment Eligibility Verification requirements were first established
in 1987, employers should readily recognize the document combination as
acceptable for such purposes.
Further, DHS is satisfied that this document combination contains
sufficient security features, as required by section
274A(b)(1)(B)(ii)(III) of the INA, 8 U.S.C. 1324a(b)(1)(B)(ii)(III). An
Arrival/Departure Record issued to an entrepreneur parolee will
indicate the validity period for parole and the new code of admission
(``PE-1'') that is specific to such parolees. In addition, DHS proposes
to automatically extend the employment authorization of an entrepreneur
parolee whose parole has expired but who has filed a timely application
for re-parole with the same start-up entity. See proposed 8 CFR
274a.12(b)(37). In such cases, employment authorization would be
extended for a period not to exceed 240 days beginning on the date of
expiration of parole. Extending work authorization in this manner would
allow an entrepreneur parolee to continue working without interruption
with his or her start-up entity while the application for re-parole is
pending.
4. Technical Changes
DHS is proposing to revise the existing, general parolee employment
eligibility provision at 8 CFR 274a.12(c)(11) to clarify that the
employment eligibility of entrepreneur parolees and their spouses under
this rule are governed by proposed 8 CFR 274a.12(b)(37) and 8 CFR
274a.12(c)(34) rather than 8 CFR 274a.12(c)(11). In addition, DHS is
proposing to update 8 CFR 274a.12(c)(11) to replace outdated references
to parole ``for emergency reasons'' and ``reasons deemed strictly in
the public interest'' with the current statutory standards for parole--
``urgent humanitarian reasons'' and ``significant public benefit.'' See
INA section 212(d)(5)(A), 8 U.S.C. 1182(d)(5)(A).
E. Material Change Reporting
DHS proposes that, consistent with filing requirements for
reporting material changes in other contexts (such as the requirement
to submit amended petitions when there are material changes), an
entrepreneur who has been granted parole under this rule would be
required to immediately report to USCIS any material changes
potentially affecting his or her grant of parole. See proposed 8 CFR
212.19(j). In cases involving one or more material changes where the
entrepreneur will continue to be employed or associated with his or her
start-up entity, the entrepreneur must submit a new Application for
Entrepreneur Parole with fee (not including any biometric fees) to
notify USCIS of the material change(s). Depending on the nature and
scope of the material change(s) reported, USCIS may continue to
authorize parole or seek to terminate parole. If the entrepreneur will
no longer be employed or associated with the start-up entity, or if he
or she ceases to possess at least a 10 percent ownership stake in the
entity, the entrepreneur must immediately notify USCIS in writing of
those changes. Upon receipt of such notification, USCIS would issue an
automatic revocation of the entrepreneur's parole, as well as the
parole of any dependents.
For purposes of this rule, DHS proposes the term ``material
change'' to
[[Page 60146]]
mean any change in facts that could reasonably affect the outcome of
DHS's determination that the entrepreneur provides, or continues to
provide, a significant public benefit to the United States. Such
changes would include, but are not limited to, the following: Any
criminal charge, conviction, plea of no contest, or other judicial
determination in a criminal case concerning the entrepreneur or start-
up entity; any complaint, settlement, judgment, or other judicial or
administrative determination concerning the entrepreneur or start-up
entity in a legal or administrative proceeding brought by a government
entity; any settlement, judgment, or other legal determination
concerning the entrepreneur or start-up entity in a legal proceeding
brought by a private individual or organization involving claims for
damages exceeding 10 percent of the current assets; a sale or other
disposition of all or substantially all of the start-up entity's
assets; the liquidation, dissolution or cessation of operations of the
start-up entity; the voluntary or involuntary filing of a bankruptcy
petition by or against the start-up entity; and any significant change
to the entrepreneur's role in or ownership and control of the start-up
entity or any other significant ownership and control change in the
start-up entity. See proposed new 8 CFR 212.19(a)(10) and (j). Failure
to timely file or otherwise comply with the material change reporting
requirements may result in a denial of subsequent parole applications
or revocation of parole according to proposed 8 CFR 212.19(k)(3)(ii).
DHS welcomes public comment on the proposed definition of the term
``material change.'' DHS also welcomes comment on the types of
situations that would constitute material changes.
F. Re-Parole
DHS proposes that individuals who have been granted entrepreneur
parole may be eligible for one additional, successive period of re-
parole of up to 3 years with the same start-up entity if such
additional period of parole is determined to serve a significant public
benefit. See proposed 8 CFR 212.19(c) and (f). An individual may thus
be paroled into the United States under the proposed rule, pursuant to
an initial period of parole and any period of re-parole, for a maximum
period of 5 years. See proposed 8 CFR 212.19(f). An entrepreneur
parolee seeking re-parole should request such re-parole before his or
her current period of parole expires. Failure to file a request for re-
parole before the expiration of the current parole period will result
in an automatic termination of parole and a loss of employment
authorization for the entrepreneur and any derivatives (i.e., spouse
and any child(ren)). See proposed 8 CFR 212.19(k)(2) and 8 CFR
274.12(b)(37).
As discussed above, DHS believes that a total maximum 5-year period
of parole under this rule (an initial period of up to 2 years, plus one
possible re-parole period of up to 3 years) is consistent with the
amount of time successful start-up entities generally require to
realize their growth potential. This would generally allow sufficient
time for a successful start-up entity to engage in an initial public
offering, or otherwise advance past the generally recognized start-up
phase.\43\ As also noted above, DHS would retain the discretion to
provide any length of parole to an applicant, including a cumulative
period shorter than 5 years.
---------------------------------------------------------------------------
\43\ Estimates based on the Census Bureau Business Dynamics
Statistics suggest that on average 55 percent of new firms survived
after 3 years, but 80 percent of the firms that survived 3 years
also made it through 5 years. Dane Stangler and Jared Konczal ``Give
me your entrepreneurs, your innovators: Estimating the Employment
Impact of a Startup Visa'', Ewing Marion Kauffman Foundation
(February 2013), available at http://www.kauffman.org/~/media/
kauffman_org/research%2Oreports%20and%20covers/2013/02/
startup_visa_impact_final.pdf; ``CrunchBase Reveals: The Average
Successful Startup Raises $41M, Exits at $242.9M,'' Techcrunch.com
(Dec. 14, 2013), available at http://techcrunch.com/2013/12/14/crunchbase-reveals-the-average-successful-startup-raises-41m-exits-at-242-9m/. See also TruBridge Capitol Partners, Why the `Next
Billion Dollar Startup' Is not Always the Next IPO, Forbes, Apr. 15,
2015, available at http://www.forbes.com/sites/truebridge/2015/04/15/why-next-billion-dollar-startup-not-always-next-ipo/ (``From
2001-2004, the average age of a company at its public exit was 5.4
years . . . . From 2009-2012, the average age was 7.9.'').
---------------------------------------------------------------------------
DHS welcomes comments regarding the length of parole and re-parole.
1. Criteria for Re-Parole
To be considered for re-parole, an entrepreneur parolee must
demonstrate that his or her stay in the United States pursuant to
parole would continue to provide a significant public benefit. DHS
proposes that an individual may meet this standard by demonstrating
that his or her start-up entity continues to demonstrate substantial
potential for rapid growth and job creation and that his or her parole
would significantly help the entity continue to conduct and grow its
business here. See proposed 8 CFR 212.19(c)(2). Because, however, the
economic activity of a successful start-up entity would likely have
changed since commencement of the initial parole period, DHS is
proposing certain adjusted and additional criteria for granting re-
parole in comparison to the criteria for initially granting parole
under this proposed rule. As described further below, such changes are
intended to ensure that the start-up entity continues to have
substantial potential for rapid growth and job creation and,
ultimately, that parole of the entrepreneur parolee continues to be
justified on significant public benefit grounds.
A. Entity Continues To Be a Start-Up Entity
As noted above, the key to meriting parole under this proposed rule
is the formation of an entity in the United States with the substantial
potential to show rapid growth, including through increased revenue and
job creation. DHS thus proposes that an applicant for re-parole show
that his or her entity continues to be a ``start-up entity'' as that
term is defined at proposed 8 CFR 212.19(a)(2). See proposed 8 CFR
212.19(c)(2)(ii)(A). At the re-parole stage, this would mean showing
that the entity: (1) Has continued to lawfully do business during the
initial period of parole, and (2) continues to have the substantial
potential to experience rapid growth and job creation, including
through significant revenue generation or attraction of capital
investment.\44\ Id. As discussed in section IV.B.1, the requirement for
the entity to have operated lawfully in the United States during any
prior period of parole is intended to ensure lawful conduct and protect
the integrity of the proposed parole process under this rule. The
requirement that the entity have the substantial potential to
experience rapid growth and job creation is intended to capture the
types of start-up entities that are most likely to meet the significant
public benefit test, while excluding types of entities without such
potential.
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\44\ The entity would also need to continue to meet the
definition of ``U.S. business entity'' at proposed 8 CFR
212.19(a)(9).
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As with the application for initial parole, DHS anticipates that an
applicant for re-parole would be able to meet the above criteria by
submitting various forms of evidence. In addition to meeting the
investment, revenue, or job creation criteria described further below,
an applicant will be expected to provide supplementary evidence of the
entity's continued substantial potential for rapid growth and job
creation.
B. Applicant Continues To Be an Entrepreneur
To ensure that any successive grant of parole would continue to
serve a significant public benefit, DHS is proposing that an applicant
for re-parole show that he or she continues to meet
[[Page 60147]]
the definition of ``entrepreneur'' at proposed 8 CFR 212.19(a)(1). See
proposed 8 CFR 212.19(c)(2)(ii)(A). As discussed previously, this
definition would require the applicant for re-parole to show that he or
she: (1) Continues to possess a substantial ownership interest in the
start-up entity, and (2) continues to serve in a central and active
capacity in the entity, such that his or her knowledge, skills, or
experience would continue to substantially assist the entity with the
growth and success of its business. See proposed 8 CFR 212.19(a)(1).
For purposes of seeking re-parole, the definition further provides that
an individual may be considered to possess a substantial ownership
interest if he or she maintains at least a 10 percent ownership stake
in the start-up entity at all times during the period of parole and any
subsequent period of re-parole. Id.
As discussed in section IV.B.2., DHS believes that the definition
of ``entrepreneur'' proposed in this rule is essential to ensuring that
granting parole in an individual case would provide a significant
public benefit. By requiring an applicant for re-parole to demonstrate
that he or she continues to serve in an active and central capacity and
continues to have knowledge, skills, or experience integral to the
entity's success, DHS is ensuring that the applicant is directly
related to the entity's ability to benefit the United States, including
by conducting research and development, increasing revenue, or creating
jobs. Similarly, the ownership standard is also essential for
connecting the individual to the start-up entity and ensuring that he
or she continues to assume more than a nominal financial risk related
to the entity. The reduced 10 percent equity requirement for seeking
re-parole (as opposed to the 15 percent requirement for seeking initial
parole) takes into account the need of some successful start-up
entities to raise additional venture capital financing by selling
ownership interest during their initial years of operation.
As also discussed in section IV.B.2., DHS believes that an
entrepreneur seeking re-parole would be able to demonstrate sufficient
satisfaction of the above criteria by providing various forms of
evidence. With respect to ownership, DHS anticipates that an applicant
would be able to provide copies of legal or financial documents--such
as formation and organizational documents, equity certificates, equity
ledgers, ownership schedules, and capitalization tables--indicating the
applicant's ownership interest in the start-up entity. With respect to
the applicant's role within the entity, DHS expects that an applicant
could satisfy the criterion by providing evidence showing that he or
she continues to serve in the same capacity as that described in the
initial parole application. If the applicant has changed positions
within the entity, he or she would need to provide evidence
demonstrating that he or she continues to serve in a central and active
capacity within the entity and that his or her knowledge, skills, or
experience would continue to substantially assist the entity with the
growth and success of its business.
C. Investment, Revenue, and Job Creation Criteria for Re-Parole
Consideration
DHS further proposes that, to seek re-parole under this rule, an
entrepreneur would need to further validate, through additional
reliable evidence, the start-up entity's continued substantial
potential for rapid growth and job creation. DHS is proposing that this
requirement may generally be satisfied by demonstrating that the entity
has: (1) Received substantial additional qualifying funding, such as
awards or grants from qualifying government entities or investments of
capital from U.S. investors with established records of successful
investment; (2) generated substantial and rapidly increasing revenue in
the United States over the prior parole period; or (3) generated a
substantial number of qualified jobs for U.S. workers. See proposed 8
CFR 212.19(c)(2)(ii)(B). As with applications for initial parole, DHS
further proposes that an applicant who partially meets one or more of
these criteria for re-parole may be considered for re-parole under this
rule if he or she provides additional reliable and compelling evidence
that his or her re-parole would provide a significant public benefit.
i. Qualifying Funding From U.S. Investors or Government Entities
DHS proposes to allow an applicant to demonstrate that a start-up
entity continues to have substantial potential for rapid growth and job
creation by showing that during the preceding period of parole the
entity received additional substantial qualifying funding--through
``qualifying investments,'' ``qualified government grants or awards,''
or a combination of both. See proposed 8 CFR 212.19(a)(5) and
(c)(2)(ii)(B)(1). DHS proposes that such total investments made to the
entity during the initial parole period may generally be considered
``substantial'' with respect to an application for re-parole if they
cumulatively meet or exceed $500,000. Id. As with the application for
initial parole, ``qualifying investments'' must be from established
U.S. investors (such as venture capital firms, angel investors, or
start-up accelerators) with a history of substantial and successful
investments in start-up entities. Such qualifying investors would
include only those investors who have a history of making similar or
greater investments on a regular basis over the last 5 years and who
can demonstrate that at least two of the entities receiving such
investments have subsequently experienced significant growth in revenue
and job creation. See proposed 8 CFR 212.19(a)(5). With respect to
``qualified government grants or awards,'' the grants or awards
generally would need to be made by one or more Federal, State, or local
government entities that regularly provide such funding to U.S.
businesses for economic development, innovation, research and
development, or job creation reasons. See proposed 8 CFR 212.19(a)(3).
DHS believes that these investment criteria are reasonable for
subsequent grants of parole based on consultation with the SBA, as well
as the amounts of investment made in start-up entities during initial
rounds of capital investment.\45\ DHS believes these standards are
important to ensure that the start-up entity is showing signs of
success and continues to have substantial potential for rapid growth
and job creation.
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\45\ See note 32.
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DHS welcomes comment on all aspects of this section, including the
proposed investment threshold for re-parole and any potential
alternatives to such thresholds. For comments regarding investment
threshold amounts, the Department requests that commenters provide
rationales and data, if available, to support their recommendations.
ii. Substantial Revenue Generation
DHS also proposes to allow an applicant to demonstrate that a
start-up entity continues to have substantial potential for rapid
growth and job creation by showing that the entity has exhibited rapid
growth in terms of revenue generation in the United States during the
relevant parole period. DHS proposes that an applicant may generally be
able to meet this standard by demonstrating that the entity reached at
least $500,000 in annual revenue, with at least 20 percent average
annual revenue growth, during the initial parole period. See proposed 8
CFR 212.19(c)(2)(ii)(B)(3). DHS believes that
[[Page 60148]]
these revenue criteria are reasonable and consistent with the
requirement that the entity have the substantial potential for rapid
growth and job creation and, ultimately, with the requirement that the
entrepreneur's parole provide a significant public benefit to the
United States.
Based on consultation with the SBA, DHS believes $500,000 and 20
percent annual revenue growth would be reasonable criteria for purposes
of re-parole. Notably, evaluating revenue generation and growth is
industry- and location-specific, and start-up entities may be at
different stages of development at the time applicants file their
parole requests. DHS considered proposing revenue and growth thresholds
that varied by industry and geographic location, but determined that
such an approach would be extremely difficult to administer. Instead,
DHS decided to propose threshold criteria that would generally apply to
start-up entities under this parole process. DHS chose $500,000 in
revenue and 20 percent annual revenue growth as proposed threshold
criteria because, after consulting with SBA, DHS determined these
criteria: (1) Would be reasonable as applied across start-up entities
regardless of industry or location; and (2) would serve as strong
indications of an entity's potential for rapid growth and job creation
(and that such entity is not, for example, a small business created for
the sole or primary purpose to provide income to the owner and his or
her family).
DHS's proposed revenue amount is based on analysis of available
data \46\ showing average revenue over a 3-year period of $215,000 for
all new firms in innovative sectors. Adjusted for inflation, the
average revenue of such firms is approximately $250,000. In analyzing
this data, DHS applied a 20 percent growth rate, which is a high growth
threshold utilized in economic and business research,\47\ to the
$250,000 average revenue for 2 years (the proposed length for initial
parole). At a growth rate of 20 percent each year, revenue of $250,000
would grow to $360,000 over a 2-year period. DHS proposed $500,000 as
the revenue criterion to take into account the fact that revenue of
$360,000 represents an average for all new firms in innovative sectors
and the proposed rule is aimed towards assisting high-growth startups
that will provide a significant public benefit. As such, DHS believes
it is appropriate to propose an amount that takes into consideration
that range of industries and locations in which start-ups may conduct
business, but that exceeds the average revenue for new firms, so that
such an amount can serve, in combination with a 20 percent growth rate,
as a reliable indicator of a start-up entity's substantial potential
for continued growth and job creation. While DHS does not have reliable
revenue data that is specific to high-growth startups (the revenue data
available to DHS includes all new firms, including non-startups,
startups, and high-growth startups), DHS believes that its analysis of
available data supports the proposed $500,000 revenue criteria as a
reasonable indicator of the entrepreneur's ability to continue to
provide a significant public benefit to the United States.
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\46\ DHS analyzed data found in the Census Bureau's Survey of
Business Owner's data (SBO) set, Table SB0700CSCB10, ``Statistics
for All U.S. Firms by Year the Business Was Originally Established
by Industry, Gender, Ethnicity, Race, and Veteran Status for the
U.S.: 2007'' found at: http://www.census.gov/econ/sbo/historical.html?2007. DHS calculated revenue per firm for the 3
years each of 2005, 2006 and 2007, which would account for ``new
firms'' aged 3 or less since the benchmark year was 2007. To account
for sectors involved mainly in innovation, DHS attempted to match
sectors to those utilized in the volume projections section of the
concomitant economic analysis section of the rule's regulatory
impact assessment. Of those nine broad sectors, ``Waste Services''
is not listed separately and hence DHS utilized the other eight
sectors. Because the data are arranged with two identifiers of
interest, ``year established'' and ``sector,'' DHS conducted an
unweighted average across the 24 data points (8 sectors with 3 years
each) to arrive at an average of $215,000.
\47\ High-growth firms are defined by the Department of Labor's
Bureau of Labor Statistics (BLS) and the Organization for Economic
Cooperation (OECD) as those with at least ten employees that grow by
at least 20 percent for each of 3 consecutive years based on
employment. For a description of the methodology utilized to measure
high-growth firms, see OECD, ``OECD-Eurostat Manual on Business
Demography Statistics'' (2007), pp. 59-65, available at: http://www.oecd.org/std/39974460.pdf. Although the BLS and standard OECD
definition applies specifically to employment, both agencies
recognize that employment growth may not be a suitable measure in
all cases and that valid alternative measures may be utilized. There
have been a number of alternatives proposed in various peer-reviewed
literature and ongoing research. For purposes of the present rule,
discussion of the 20 percent growth rate in revenue, instead of
employment specifically, concomitant to that DHS proposes, can be
found at: Mogos, S., Davis, A. & Baptista, R. (2015), ``Defining
High Growth Firms. Sustainable Growth, Volatility, and Survival,''
Proceedings of DRUID15 Conference. June 2015, available at: http://druid8.sit.aau.dk/acc_papers/rpq1k6cpebbhti9vh29xudqp3juy.pdf. See
also Karl Wennberg, Managing High-Growth Firms: A literature review
(2013), OECD: ``International Workshop on ``Management and
Leadership Skills in High-Growth Firms,'' available at: http://www.oecd.org/cfe/leed/Wennberg_Managing%20a%20HGF.pdf.
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DHS is proposing both a general minimum revenue threshold and a
threshold percentage increase in such revenue to account for a range of
start-up entities that may qualify an entrepreneur for re-parole under
this rule based on revenue generation. A $500,000 minimum revenue
threshold at the re-parole stage, for example, would by itself indicate
little about a start-up entity that had already been generating such
revenue when the application for initial parole was filed. For such an
entity, the 20 percent revenue growth threshold would ensure the entity
is exhibiting substantial growth and the ability to sustain substantial
job creation. As noted above, 20 percent annual revenue growth is the
rate used by the Department of Labor's Bureau of Labor Statistics to
indicate a high rate of growth among U.S. businesses. At the same time,
the 20 percent revenue growth threshold would be insufficient by itself
with respect to entities that were at the lower end of the revenue
generation scale when the application for initial parole was filed. For
example, an entity that was generating only $250,000 in annual revenue
at the time the initial parole application was filed would only require
a total increase of $110,000 in annual revenue over the 2-year parole
period to meet the 20 percent revenue growth threshold. For such
entities, the $500,000 annual revenue threshold is intended to ensure
rapid growth and the potential to sustain substantial job creation. As
with the standards for initial parole, DHS believes that the above
standards for re-parole: (1) Would be reasonable among start-up
entities regardless of industry or location; and (2) would serve as
strong indications of an entity's potential for continued rapid growth
and job creation. DHS welcomes comments on the proposed revenue
generation and annual revenue growth thresholds for re-parole,
including any potential alternatives.
iii. Job Creation
DHS further proposes to allow an applicant to demonstrate his or
her entity's substantial potential for rapid growth and job creation by
showing that the entity has exhibited rapid growth in terms of job
creation during the relevant parole period. DHS proposes that an
applicant may generally be able to meet this standard by demonstrating
that the entity created at least 10 qualified jobs with the start-up
entity for U.S. workers during the initial parole period. DHS decided
to require at least 10 qualified jobs for re-parole based on survey
data indicating that the average employment at new businesses in 2011
was 8.7 employees.\48\ DHS further believes that
[[Page 60149]]
this job creation standard is reasonable for demonstrating a start-up
entity's recent history of rapid growth and job creation.
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\48\ Alicia Robb, Joseph Farhat, ``An Overview of the Kauffman
Firm Survey'', June 2013, p. 4. ``While about 40 percent of firms
had employees in 2004, by 2011 about 53 percent of surviving firms
had employees. Surviving firms with employees, which are now in
their eighth year of operations, increased average employment to 8.7
employees in 2011, up from 7.5 employees in 2010.''
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Moreover, DHS is proposing a definition for the term ``qualified
job'' to limit the types of jobs that may be used to justify a grant of
parole under this rule. See proposed 8 CFR 212.19(a)(6). Under the
proposed rule, the term ``qualified job'' would mean full-time
employment, as defined at the proposed 8 CFR 212.19(a)(8), located in
the United States with the entrepreneur's start-up entity that has been
filled for at least 1 year by one or more qualifying employees. See
Proposed 8 CFR 212.19(a)(6). In addition, the term ``qualifying
employee'' would mean a U.S. citizen, a lawful permanent resident, or
other immigrant lawfully authorized to be employed in the United States
(e.g., an asylee or refugee), who is not an entrepreneur of the
relevant start-up entity or the parent, spouse, brother, sister, son,
or daughter of such an entrepreneur. See proposed 8 CFR 212.19(a)(7).
For job creation to establish eligibility for a grant of parole, DHS
believes it is important that the job be filled by an employee who is
not closely related to an entrepreneur of the start-up entity. This
limitation would mitigate the potential for fraud relating to any
claimed job creation and the legitimacy of the business, and it would
help to distinguish bona fide start-up entities from small businesses
with limited growth potential created for the sole or primary purpose
of providing income to the entrepreneurs and their families. DHS
believes that merely creating jobs for the entrepreneur and the
entrepreneur's family would be unlikely to provide a significant public
benefit to the United States and should thus not serve as a basis for
parole under this rule.
Additionally, DHS proposes that the term ``full-time employment,''
as referenced in the proposed definition of ``qualified job,'' would
mean paid employment of an employee by the entrepreneur's start-up
entity in a position that requires a minimum of 35 working hours per
week. See proposed 8 CFR 212.19(a)(8). The Department of Labor
similarly defines full time employment as requiring 35 or more hours a
week.\49\ Full-time employment, however, would not include combinations
of part-time positions even if, when combined, such positions meet the
hourly requirement per week. DHS believes that requiring that the
employment include full-time remuneration would help to ensure that the
entity will provide a significant public benefit to the United States
and mitigates the potential for fraud as it relates to any claimed job
creation and the legitimacy of the business. See proposed 8 CFR
212.19(a)(8).
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\49\ Department of Labor Bureau of Labor Statistics, Glossary
(last modified Feb. 28, 2008), http://www.bls.gov/bls/glossary.htm#F.
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iv. Alternative Criteria for Re-Parole Consideration
Finally, as with the application for an initial grant of parole,
DHS proposes that an applicant who only partially meets one or more of
the above sub-criteria related to capital investment, revenue
generation, or job creation may be considered for re-parole under this
rule in certain limited circumstances. See proposed 8 CFR
212.19(c)(2)(iii). Specifically, DHS may consider another period of
parole for such an applicant if he or she provides, in addition to
evidence that one or more of the sub-criteria have been partially met,
``reliable and compelling'' evidence of the entity's continued
substantial potential for rapid growth and job creation than would be
required if the applicant had fully met one or more of the above sub-
criteria. Id. Importantly, re-parole would not be available to an
applicant who fails to demonstrate any U.S. investment, revenue
generation, or job creation. Rather, the applicant would need to show
as a preliminary matter that the start-up entity has: (1) Received a
substantial level of investment through a combination of qualifying
investments and qualified government grants or awards (although less
than $500,000); (2) generated a substantial level of revenue (although
less than $500,000 with at least 20 percent average annual revenue
growth); or (3) generated a substantial number of qualified jobs in the
United States (although less than 10). The applicant would also need to
demonstrate the entity's potential for rapid growth and job creation by
submitting additional evidence that DHS determines to be both reliable
and compelling. DHS proposes that such evidence be reliable and
compelling in its own right to overcome the applicant's inability to
fully meet the threshold criteria otherwise required by this rulemaking
for re-parole.
As noted previously, DHS is not proposing to define the specific
types of evidence that may be deemed ``reliable and compelling'' at
this time, because DHS seeks to retain flexibility as to the kinds of
supporting evidence that may warrant the Secretary's exercise of
discretion in granting parole based on significant public benefit. But
DHS believes that such evidence would need to be compelling to
demonstrate that the entrepreneur's presence here would provide a
significant public benefit considering the entity's inability to meet
the otherwise applicable threshold criteria for consideration. DHS will
ultimately be required to decide whether such evidence--in conjunction
with the entity's substantial investment, revenue generation, or job
creation--is sufficient to establish that the applicant's presence in
the United States will provide a significant public benefit. This
approach is consistent with the discretionary nature of the Secretary's
statutory parole authority and the fact that each parole request will
be adjudicated, on a case-by-case basis, after considering the
particularized facts of each case.
DHS invites public comment on the level and types of reliable and
compelling evidence that may warrant a discretionary grant of parole in
such cases. DHS also invites public comment on alternatives to the
proposed funding, revenue generation, and job creation thresholds that
applicants may use to demonstrate a start-up entity's continued
substantial potential for rapid growth and job creation and that may
serve as a principal basis for seeking re-parole under this rule.
Commenters should recommend threshold levels for obtaining re-parole
under suggested criteria, along with the types of reliable evidence
that applicants may submit to substantiate their claims, including any
relevant data if available.
2. Application Requirements for Re-Parole
Under the proposed rule, an entrepreneur parolee seeking a period
of re-parole would be required to file a request for re-parole with
USCIS using the same form as for initial parole, the Application for
Entrepreneur Parole (Form I-941, or successor form), and pay the same
fees (filing and biometric services fees). See proposed new 8 CFR
212.19(c)(1). The entrepreneur would generally be required to file the
request for re-parole before the expiration of the current period of
parole. If the entrepreneur is in the United States at the time that
USCIS approves the request for re-parole, such approval would also
constitute a grant of parole. See proposed new 8 CFR 212.19(d)(3). An
entrepreneur present in the United States in a period of parole would
not be required to depart and return to the United States in order to
request a new
[[Page 60150]]
grant of parole from CBP at a port of entry. Along with the approval
notice, USCIS would issue an electronic Arrival/Departure Record (Form
I-94) reflecting the new period of parole and the code of admission
assigned to entrepreneur parolees. USCIS would also issue the
entrepreneur's spouse and children who have filed their own separate
requests for parole, if also approved for an additional period of
parole, new Arrival/Departure Records reflecting the same period of
parole as the entrepreneur, but with the appropriate dependent
entrepreneur parolee codes.
The entrepreneur (or spouse or dependent child), if outside the
United States upon the approval of the re-parole application, would
have to obtain a travel document from USCIS or DOS (e.g., a boarding
foil) and appear at a port of entry for CBP to make the final re-parole
determination and, if granted, issue new Arrival/Departure Records.
Just as with initial parole, entrepreneurs granted re-parole would be
authorized to be employed by the start-up entity, incident to their
parole under this proposed rule. See proposed 8 CFR 274a.12(b)(37).
Such entrepreneurs also would be permitted to use their foreign
passport in combination with their Arrival/Departure Record reflecting
the new period of parole to demonstrate their identity and employment
authorization for purposes of compliance with the Employment
Eligibility Verification (Form I-9) requirements. See proposed 8 CFR
274a.2(b)(1)(v)(A)(5); see also proposed revisions to the Form I-9,
Lists of Acceptable Documents.
3. Ensuring Continuous Employment Authorization
To facilitate maintenance of continuous work authorization and
parole, DHS is proposing that an entrepreneur parolee may file a
request for re-parole beginning 90 days prior to the expiration date of
his or her current period of parole. See proposed Form Instructions for
the Application for Entrepreneur Parole (Form I-941). To prevent
potential gaps in employment authorization for entrepreneurs seeking
re-parole, DHS proposes to extend automatic employment authorization to
those entrepreneurs whose current parole period expires while their
request for re-parole is pending. See proposed 8 CFR 274a.12(b)(37).
DHS is proposing that this automatic employment authorization will
extend for 240 days from the date the entrepreneur's initial parole
period expires, or until USCIS makes a decision on the re-parole
request, whichever is sooner, when a request for re-parole was timely
filed by the entrepreneur. Id. This 240-day automatic extension of
employment authorization is comparable to the extension currently
provided by regulation to most nonimmigrants authorized for employment
incident to status with a specific employer who have filed a request
for an extension of stay with the same employer. See 8 CFR
274a.12(b)(20). DHS believes that a 240-day period of automatic
employment authorization is equally appropriate for entrepreneur
parolees and is a sufficient period of time to ensure that the
entrepreneur does not experience gaps in employment authorization on
account of the adjudication process. The 240-day period takes into
account the complex and time-consuming adjudication required for re-
parole, as well as the required biometric services appointment, which
may require up to 90 days for scheduling.
G. Termination of Parole
DHS is proposing provisions governing termination of parole under
this rule in cases where DHS believes such termination is appropriate,
including circumstances indicating that continued parole would no
longer provide a significant public benefit, pursuant to section
212(d)(5)(A) of the INA, 8 U.S.C. 1182(d)(5)(A). Consistent with DHS's
parole authority, under this proposed rule DHS may, in its discretion,
terminate parole granted under 8 CFR 212.19 at any time and without
prior notice or opportunity to respond. Alternatively, DHS may, in its
discretion, provide the entrepreneur notice and an opportunity to
respond prior to terminating his or her parole under 8 CFR 212.19. In
addition to the general grounds for termination of parole described at
8 CFR 212.5(e),\50\ DHS is proposing the following grounds for
termination of entrepreneur parole:
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\50\ The termination provisions in current parole regulations
provide for termination on written notice in situations where the
justification for granting parole has ended or, in the opinion of an
authorized officer, neither humanitarian reasons nor public benefit
warrants the continued presence of the alien in the United States.
See 8 CFR 212.5(e)(2)(i).
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1. Automatic termination
DHS believes that certain circumstances warrant automatic
termination of parole. In this rule, DHS proposes that parole will
automatically terminate if: (a) The period of parole expires, unless
the individual timely files a non-frivolous application for re-parole;
or (b) USCIS receives written notice from the entrepreneur that he or
she will no longer be employed by the start-up entity or ceases to
possess at least a 10 percent ownership stake in the start-up entity in
accordance with 8 CFR 212.19(j). See proposed 8 CFR 212.19(k)(2).
Additionally, the parole of the spouse or child of the entrepreneur
will be automatically terminated without notice if the parole of the
entrepreneur has been terminated. Id. If a spouse whose parole is
terminated also has employment authorization, the employment
authorization is automatically revoked.
2. Termination on Notice
Even though DHS has the discretion to terminate parole without
prior notice, USCIS will generally attempt to provide the entrepreneur
or his or her spouse or children, as applicable, written notice of its
intent to terminate parole if USCIS 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 is no longer employed in a central and active role by the
start-up entity or ceases to possess at least a 10 percent ownership
stake in the start-up entity; (d) the alien otherwise violated the
terms and conditions of parole; or (e) parole was erroneously granted.
See proposed 8 CFR 212.19(k)(3). The decision to provide notice and an
opportunity to respond prior to termination of parole under 8 CFR
212.19 will be made in the discretion of DHS on a case-by-case basis.
In cases where USCIS provides written notice and an opportunity to
respond, through a notice of intent to terminate, DHS is proposing to
provide a period of up to 30 days for the alien's written rebuttal. See
proposed 8 CFR 212.19(k)(4). The notice of intent to terminate would
generally identify the grounds for termination of the parole and the
alien may submit additional evidence in support of his or her rebuttal,
when applicable. Id. Providing a rebuttal period of up to 30 days is
generally consistent with rebuttal periods applicable to other
immigration petitions and applications (e.g., I-129 or I-140). If DHS
nevertheless decides to terminate parole, the entrepreneur and/or his
or her spouse and children are restored to the status that he or she
had at the time of parole, such as being applicants for admission. See
8 CFR 212.5(e)(2)(i). Consistent with current parole procedures, DHS
does not propose a right to appeal a decision regarding termination of
parole on notice. Id.
[[Page 60151]]
If a charging document is served on the alien, the charging
document will constitute written notice of termination of parole (if
parole has not already been terminated), unless otherwise specified.
Id.
In the event of a violation of one or more terms and conditions of
parole solely by the spouse or a child of the entrepreneur, parole may
be terminated for the violator (i.e., spouse or child) without
affecting the entrepreneur's parole. If a spouse whose parole is
terminated also has employment authorization, the employment
authorization will be revoked. 8 CFR 274a.14(b)(1)(i).
The entrepreneur and any dependents granted parole under this
program will be required to depart the United States when their parole
periods have expired or have otherwise been terminated, unless such
individuals are otherwise eligible to lawfully remain in the United
States. At any time prior to reaching the 5-year limit for parole under
this proposed rule, such individuals may apply for any immigrant or
nonimmigrant classification for which they may be eligible (such as
classification as an O-1 nonimmigrant or lawful permanent residency
through employer sponsorship). If such individuals are approved for a
nonimmigrant or employment-based immigrant visa classification, they
would generally be required to depart the United States and apply for a
visa with DOS. As noted above, because parole is not considered an
admission to the United States, parolees are unable to apply to adjust
or change their status in the United States under many immigrant or
nonimmigrant visa classifications.
H. Automatic Adjustment of Investment and Revenue Amount Requirements
DHS proposes that the investment and revenue amounts specified at
proposed 8 CFR 212.19(a)(5), (b)(2)(ii) and (c)(2)(ii) will be
automatically adjusted every 3 years by the Consumer Price Index for
All Urban Consumers (CPI-U).\51\ USCIS will provide notice in the
Federal Register and on its Web site at www.uscis.gov prior to the
beginning of the fiscal year in which the change would take effect.
Investment and revenue amounts adjusted by the CPI-U will apply to all
applications filed on or after the beginning of that fiscal year. DHS
believes that automatically adjusting the minimum dollar amounts by the
CPI-U every 3 years will maintain investment and revenue requirements
at an appropriate level in relation to future economic conditions. DHS
believes adjusting the minimum dollar amounts every 3 years will be
more manageable operationally for DHS and less burdensome to applicants
than adjustments at more frequent intervals. See proposed 8 CFR
212.19(l).
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\51\ The CPI-U produces monthly data on changes in the prices
paid by urban consumers for a representative basket of goods and
services. See http://www.bls.gov/cpi/.
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I. Technical Change
DHS is proposing a technical change to 8 CFR 274a.2(b)(1)(v)(C) to
add the Department of State (DOS) Form FS-240 Consular Report of Birth
Abroad, or successor form, to the list of acceptable documents under
the ``list C'' column of Form I-9, Employment Verification Eligibility.
Since 2011, Form FS-240 has been exclusively issued by DOS as evidence
of a U.S. citizen's birth abroad and acquisition of U.S. citizenship at
birth, as well as used to replace a lost, stolen, or damaged Form FS-
545 Certification of Birth Abroad or Form DS-1350 Certification of
Report of Birth. This technical change will formally recognize the Form
FS-240, or successor form, as an acceptable document to establish
employment authorization for Form I-9 purposes.
V. Statutory and Regulatory Requirements
A. Unfunded Mandates Reform Act of 1995
The Unfunded Mandates Reform Act of 1995 (UMRA) is intended, among
other things, to curb the practice of imposing unfunded Federal
mandates on State, local, and tribal governments. Title II of the Act
requires each Federal agency to prepare a written statement assessing
the effects of any Federal mandate in a proposed or final agency rule
that may result in a $100 million or more expenditure (adjusted
annually for inflation) in any one year by State, local, and tribal
governments, in the aggregate, or by the private sector. The value
equivalent of $100 million in 1995 adjusted for inflation to 2015
levels by the Consumer Price Index for All Urban Consumers (CPI-U) is
$155 million.
This rule does not exceed the $100 million expenditure in any one
year when adjusted for inflation ($155 million in 2015 dollars), and
this rulemaking does not contain such a mandate. The requirements of
Title II of the Act, therefore, do not apply, and DHS has not prepared
a statement under the Act.
B. Small Business Regulatory Enforcement Fairness Act of 1996
This rule is not a major rule as defined by section 804 of the
Small Business Regulatory Enforcement Act of 1996. This rule will not
result in an annual effect on the economy of $100 million or more, a
major increase in costs or prices, or significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of United States companies to compete with foreign-based
companies in domestic and export markets.
C. Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This rule has been designated a ``significant regulatory
action'' under section 3(f) of Executive Order 12866. Accordingly, the
rule has been reviewed by the Office of Management and Budget.
1. Summary
The proposed rule is intended to add new regulatory provisions
guiding the use of parole with respect to individual foreign
entrepreneurs of start-up entities whose entry into the United States
would provide a significant public benefit through the substantial and
demonstrated potential for rapid growth and job creation. Such
potential would be indicated by, among other things, the receipt of
significant capital financing from U.S. investors with established
records of successful investments, or obtaining significant awards or
grants from certain Federal, State or local government entities. The
regulatory amendments would provide the general criteria for
considering requests for parole submitted by such entrepreneurs.
DHS assesses that the rule, if finalized, will reduce a barrier to
entry for new innovative research and entrepreneurial activity in the
U.S. economy. The full potential of foreign entrepreneurs to benefit
the U.S. economy is presently limited since many foreign entrepreneurs
who seek to enter the United States and manage their own start-up
entities do not qualify under existing nonimmigrant and
[[Page 60152]]
immigrant classifications.\52\ If this rule were finalized, some new
innovative entrepreneurs will be able to pursue their entrepreneurial
endeavors in the United States and contribute to the U.S. economy. In
the absence of the rule, these innovative entrepreneurs might be
delayed or discouraged altogether in bringing innovation and job
creation to the United States.
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\52\ Nina Roberts, For foreign tech entrepreneurs, getting a
visa to work in the US is a struggle, The Guardian, Sept. 14, 2014,
available at http://www.theguardian.com/business/2014/sep/14/foreign-tech-entrepreneurs-visa-us-struggle; Amy Grenier, Majority
of U.S. Patents Granted to Foreign Individuals, April 11, 2014,
available at http://immigrationimpact.com/2014/04/11/majority-of-u-s-patents-granted-to-foreign-individuals/ (``Because of the
limitations of the H-1B visa program, and the lack of a dedicated
immigrant visa for entrepreneurs or innovators, foreign inventors
struggle with inadequate visa options that often prevent them from
obtaining permanent residency.'')
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Based on review of data on startup entities, foreign ownership
trends, and Federal research grants, DHS expects that approximately
2,940 entrepreneurs, sourced to 2,105 new firms with investment capital
and about 835 new firms with Federal research grants could be eligible
for this parole program annually. This estimate assumes that each new
firm is started by one person despite the possibility of up to three
owners being associated with each startup. DHS has not estimated the
potential for increased demand for parole among foreign nationals who
may obtain substantial investment from U.S. investors and otherwise
qualify for entrepreneur parole, because changes in the global market
for entrepreneurs, or other exogenous factors, could affect the
eligible population. Therefore, these volume projections should be
interpreted as a reasonable estimate of the eligible population based
on past conditions extrapolated forward. Eligible foreign nationals who
wish to apply for parole as an entrepreneur would incur the following
costs: A filing fee for the Application for Entrepreneur Parole (Form
I-941) in the amount of $1,200 to cover the processing costs for the
proposed application; a fee of $85 for biometrics submission; and the
opportunity costs of time associated with completing the proposed
application and biometrics collection. After monetizing the expected
opportunity costs and combining them with the filing fees, an eligible
foreign national applying for parole as an entrepreneur would face a
total cost of $1,480. Any subsequent renewals of the parole period
would result in the same previously discussed costs. Filings to notify
USCIS of material changes to the entrepreneur's parole, when required,
would result in similar costs; specifically, in certain instances the
entrepreneur would be required to submit to USCIS a new form I-941 to
notify USCIS of material changes to their parole and would thus bear
the direct filing cost and concomitant opportunity cost. However,
because the $85 biometrics fee would not be required with such filings,
these costs will be slightly lower than those associated with the
initial parole request and any request for re-parole.
Dependent spouses and children who seek parole to accompany or join
the principal applicant by filing a Form I-131, Application for Travel
Document, would be required to submit biographical information and
biometrics as well. Based on a principal applicant population of 2,940
entrepreneurs, DHS assumes a total of 3,234 spouses and children would
be seeking parole and submitting biometrics. Each dependent would incur
a filing fee of $360, a biometric processing fee of $85 (if 14 years of
age and over) and the opportunity costs associated with biometrics
collection. After monetizing the expected opportunity costs associated
with providing biographical information to USCIS and submitting
biometrics and combining it with the biometrics processing fee, each
dependent applicant would face a total cost of $550. DHS is also
proposing to allow the spouse of an entrepreneur paroled under this
proposed rule to apply for work authorization. Using a one-to-one
mapping of principal filers to spouses, the total population of spouses
expected to apply for work authorization is 2,940, which is an upper
bound estimate. To obtain work authorization, the entrepreneur's spouse
would be required to file Form I-765, Application for Employment
Authorization, incurring a $380 filing fee and the opportunity costs of
time associated with completing the application. After monetizing the
expected opportunity costs and combining it with the filing fees, an
eligible spouse would face a total additional cost of $416 (rounded).
DHS does not anticipate that this rule, if finalized, would generate
significant costs and burdens to private or public entities. While
applicants may face a number of costs linked to their business or
research endeavors, these costs would be driven by the business and
innovative activity that the entrepreneur is engaged in and many other
exogenous factors, not the rule itself or any processes related to the
rule. Thorough review of academic, business, and policy research does
not indicate that significant expected costs or negative consequences
linked to drawing in foreign entrepreneurs are likely to occur. As
such, DHS expects that the negative consequences, if any, would be
greatly exceeded by the positive effects of this rule.
In each case where an entrepreneur would be granted parole under
this rule, DHS would have made a determination that parole would yield
a significant public benefit and that the person requesting parole
merits a favorable exercise of discretion. Consistent with those
decisions, the rule would be expected to produce broad economic
benefits through the creation of new business ventures that otherwise
would not be formed in the United States. These businesses are likely
to create significant additional innovation, productivity, and job
creation. It is reasonable to conclude that investment and research
spending on new firms associated with this proposed rule will directly
and indirectly benefit the U.S. economy and create jobs for American
workers. In addition, innovation and research and development (R&D)
spending are likely to generate new patents and new technologies,
further enhancing innovation. Some portion of the foreign entrepreneurs
likely to be attracted to this parole process may develop high growth
and high impact firms that can be expected to contribute
disproportionately to job creation. In summary, DHS anticipates that
this proposed rule would produce positive effects that would greatly
exceed any negative consequences.
Using an estimate of 2,940 annual applications for significant
public benefit entrepreneur parole developed in the ensuing volume
projections section of this analysis (these estimates focus only on
principal initial filers, not entrepreneurs who might be eligible for a
re-parole period of up to three years, or their spouses), DHS
anticipates the total cost of this rule for principal filers who face a
total per applicant cost of $1,480 to be $4,349.827 (undiscounted)
annually for any given year. Dependent spouses and children who must
submit Form I-131 and biometrics would face a per-applicant cost of
$550, for a total cost of $1,779,604 (undiscounted). Dependent spouses
who apply for employment authorization would face a per applicant cost
of $416, which DHS projects would total $1,123,630 (undiscounted).
Adding together the costs for the principal filers and family members--
including filing costs, costs of submitting biometrics, and monetized
opportunity costs--yields a total cost of this rule for the first year,
2017 and subsequently 2018, of $7,353,061
[[Page 60153]]
(undiscounted). The total annual cost of the rule of $7,353,061 can be
expected for each subsequent year in the ten-year period. The total
ten-year undiscounted cost is $73,530,611.
2. Background and Purpose of the Proposed Rule
As described more fully in preceding sections of the preamble,
Section 212(d)(5) of the Immigration and Nationality Act (INA), 8
U.S.C. 1182(d)(5), grants the Secretary of Homeland Security the
discretionary authority to parole individuals into the United States,
on a case-by-case basis, for urgent humanitarian reasons or significant
public benefit. DHS proposes to amend its regulations implementing this
authority to increase and enhance entrepreneurship, research and
development and other forms of innovation, and job creation in the
United States. The proposed rule would establish general criteria for
the use of parole with respect to individual entrepreneurs of start-up
entities whose entry into the United States would provide a significant
public benefit through the substantial and demonstrated potential for
rapid growth and job creation.
The purpose of the proposed rule is to attract talented
entrepreneurs to the United States who might otherwise choose to pursue
such innovative activities abroad, or otherwise be significantly
delayed, given the barriers they presently face. In addition to the
intangible benefits associated with entrepreneurial innovation, and
more tangible but difficult to measure benefits associated with new
products, business networks, and possible production efficiencies that
such activities are likely to generate, entrepreneurs have been and
remain vital to economic growth and job creation in the United States
and have generated a cohort of high-growth firms that have driven a
highly disproportionate share of net new job creation.\53\
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\53\ See Richard L. Clayton, Akbar Sadeghi, David M. Talan, and
James R. Spletzer, ``High-employment-growth firms: defining and
counting them,'' Office of Industry Employment Statistics, Bureau of
Labor Statistics (BLS), Monthly Labor Review (June 2013), p. 1-2,
available at: http://www.bls.gov/opub/mlr/2013/article/pdf/clayton.pdf.
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A body of research documents both the importance of entrepreneurial
activity to the U.S. economy and its link to immigration. In this
background section, DHS does not attempt to comprehensively summarize
this large body of work but instead focuses on specific aspects central
to the purpose of the rule and to its potential impacts.\54\ In
summary, DHS focuses on the role of new entrepreneurial firms in job
creation in the United States, and the role that immigrant
entrepreneurs have played in innovation and the high technology sector.
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\54\ DHS notes that the body of research concerning immigration
in general and its impact on the labor market, most notably germane
to earnings and employment of domestic workers, is not addressed in
the present analysis.
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The labor market of the United States is highly dynamic. DHS
analysis of data published by the U.S. Department of Labor's Bureau of
Labor Statistics (BLS) indicates that between 2004 and 2013, on average
about 847,000 firms were ``born'' each year and 784,000 ``died.'' \55\
To illustrate the extent of the labor market churn, since 1980 the
private sector has generated about 16.3 million gross jobs annually but
an average of only about 1.4 million net jobs annually. In both general
business cycle expansions and contractions, large numbers of jobs are
created and destroyed, comprising a key dynamic in the forces of
creative destruction.\56\ Research into the highly dynamic and volatile
labor market in the United States has evolved. Earlier focuses on
small- and new-firm size as the primary co-determinants of job creation
has been reoriented to focus on the role of a relatively small subset
of entrepreneurial firms.
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\55\ Figures were obtained from the BLS, Business employment
Dynamics, Table 8, ``Private sector establishment births and deaths,
seasonally adjusted:'' Available at http://www.bls.gov/news.release/cewbd.t08.htm. Firm ``births'' in these data only include new firms
and thus exclude new franchises and expansions of existing firms.
\56\ See Ryan Decker, John Haltiwanger, Ron Jarmin, and Javier
Miranda, ``The Role of Entrepreneurship in US Job Creation and
Economic Dynamism,'' Journal of Economic Perspectives--Vol. 28,
Number 3 (Summer 2014), pp. 3-24, available at: http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.28.3.3.
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This proposed rule focuses on identifying entrepreneurs associated
with types of entrepreneurial firms that are more likely to experience
high growth, contribute to innovation in the United States, and create
jobs in the country. This narrowed focus is critical to ensuring that
parole in individual cases is justified by significant public benefit.
Research has shown that the average start-up company does not survive
long.\57\ Most new firms do not add much net job creation either, as
they are not focused on achieving high growth. By some estimates, the
vast majority--as much as 95 percent--of all new firms are not
substantial job creators or innovators.\58\ About 95 percent of new
firms start-up with fewer than 20 employees, and about the same
percentage ultimately close with fewer than 20 employees, indicating
that business turnover is heavily influenced by small firms.\59\
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\57\ According to BLS findings, ``20 percent of newly created
establishments don't survive their first year in business, 32
percent don't survive their first two years, and 50 percent don't
survive their first 5 years.'' See Richard L. Clayton, Akbar
Sadeghi, David M. Talan, and James R. Spletzer,''High-employment-
growth firms: defining and counting them,'' Office of Industry
Employment Statistics, Bureau of Labor Statistics (BLS), Monthly
Labor Review (June 2013), p. 1, available at: http://www.bls.gov/opub/mlr/2013/article/pdf/clayton.pdf.
\58\ See Jason Wiens and Chris Jackson, ``The Importance of
Young Firms for Economic Growth,'' Ewing Marion Kauffman Foundation
(2014), pp. 1-2, available at: http://www.kauffman.org/~/media/
kauffman_org/resources/2014/entrepreneurship%20policy%20digest/
september%202014/entrepreneurship_policy_digest_september2014.pdf.
See also Hurst, Erik, and Benjamin Wild Pugsley. 2011. ``What Do
Small Businesses Do?'' Brookings Paper on Economic Activity, no. 2
(2011), pp. 73-142.
\59\ See Headd, Brian, ``An Analysis of Small Business and
Jobs,'' SBA Office of Advocacy, (2010), p. 6, available at: https://www.sba.gov/sites/default/files/files/an%20analysis%20of%20small%20business%20and%20jobs(1).pdf.
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There is significant research, however, demonstrating that a small
subset of new firms tends to be highly dynamic and to contribute
disproportionately to net job creation. The BLS has highlighted the
role of the small subset of high-growth firms that comprise about 2
percent of all firms but have accounted for 35 percent of gross job
gains in recent years. ``High-growth firms'' are defined by the BLS and
the Organization for Economic Cooperation (OECD) as those with at least
ten employees that grow by at least 20 percent for each of 3
consecutive years based on employment. As of 2012, there were 96,900
high-growth firms in the United States that had created about 4.2
million jobs.\60\ A key finding by the BLS is that as high-growth firms
age, although they contribute, on average, less and less each year to
new jobs, by the time they reach the age of 10 years or more, their
size at that point means that the jobs they do add still account for a
large share of new jobs. Job creation in the United States for the last
several decades has been driven primarily by high-growth firms that
tend to be young and new, and by a smaller number of surviving high-
growth firms that age for a decade or more.\61\
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\60\ See R. Clayton et al., (June 2013), supra at N. 46, p. 2-4.
For a description of the methodology utilized to measure high growth
firms, see OECD, ``OECD-Eurostat Manual on Business Demography
Statistics'' (2007), pp. 59-65, available at: http://www.oecd.org/std/39974460.pdf.
\61\ For specific detailed information on survival rates and
employment creation at various intervals along the HGF life span,
see R. Decker et al., (2014), supra at N. 45, pp. 6-24. The BLS and
others use the term ``gazelles'' to differentiate the fastest
growing young HGFs.
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[[Page 60154]]
This highly disproportionate, ``up or out'' dynamism of high-growth
firms has been substantiated by many researchers. The SBA reported that
about 350,000 ``high impact firms''--defined as enterprises whose sales
have at least doubled over a 4-year period and which have an employment
growth quantifier of 2 or more over the same period--generated almost
all net new jobs in the United States between 1994 and 2006.\62\ The
Kauffman Foundation, a leading institute on research, data collection,
and advocacy for entrepreneurial activity, reports that the top-
performing one percent of firms generates roughly 40 percent of new job
creation, and, the fastest of them all--the ``gazelles''--comprising
less than one percent of all companies, generated roughly ten percent
of new jobs.\63\ The same general result has been found
internationally; the OECD reports that between three percent and six
percent of all firms can be considered high-growth firms but about one
percent can be considered the even more impressive performing
``gazelles.'' \64\
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\62\ See Spencer Tracy, Jr., ``Accelerating Job Creation in
America: The Promise of High-Impact Companies,'' SBA Office of
Advocacy (2011), pp. 1-4, available at: https://www.sba.gov/sites/default/files/advocacy/HighImpactReport.pdf. See also Acs, Zoltan,
William Parsons, and Spencer L. Tracy, Jr., ``High-Impact Firms:
Gazelles Revisited.'' Study prepared for the SBA, Office of Advocacy
(2008), p. 1, available at: http://www.sba.gov/advo/research/rs328tot.pdf. The SBA high-impact cohort is about 6.3% of all firms,
which is higher than the 2% high-growth category found in the BLS
studies. The SBA cohort is larger because the criteria are slightly
less restrictive and it includes older firms.
\63\ See Dane Stangler, ``High-Growth Firms and the Future of
the American Economy,'' Kauffman Foundation Research Series: Firm
Formation and Economic Growth (2010), p. 2, available at: http://
www.kauffman.org/~/media/kauffman_org/
research%20reports%20and%20covers/2010/04/highgrowthfirmsstudy.pdf.
\64\ David B. Audretsch, ``Determinants of High-Growth
Entrepreneurship,'' report prepared for the OECD/DBA International
Workshop on--High-growth firms: local policies and local
determinants, OECD, p. 2-5, available at: http://www.oecd.org/cfe/leed/Audretsch_determinants%20of%20high-growth%20firms.pdf.
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Despite the finding across a large number of studies that small new
firms tend to exhibit an ``up or out'' dynamic in which a small number
survive to age five to become high-growth firms or ``gazelles,'' other
key findings that have emerged in the literature suggest that the
growth and performance (as indicated by metrics that include labor
productivity, profitability, revenue, and research and development
intensity) of new firms, even high-growth firms, vary
substantially.\65\ Models that can sort out various business
characteristics and economic conditions to predict high-growth
probabilities are still in nascent stages. Nevertheless, this proposed
rule includes threshold criteria for parole consideration meant to
identify entrepreneurs associated with the kinds of promising start-up
entities that appear more likely to contribute to American innovation,
economic development, and job creation. As described in more detail
below, businesses started and run by immigrants have propelled these
kinds of broadly shared economic benefits for many years.
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\65\ See R. Decker et al. (2014), supra at N. 45, pp. 5-7. See
also Davis, Steven J., R. Jason Faberman, John Haltiwanger, Ron
Jarmin, and Javier Miranda, ``Business Volatility, Job Destruction,
and Unemployment.'' American Economic Journal: Macroeconomics 2(2)
(2010): 259-87. Research and development intensity is typically
measured as the ratio of research and development spending to
revenue, net income, or overall costs.
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Broadly speaking, entrepreneurs engage in research and development
(R&D) in order to develop and commercialize new products and
technologies. Several studies have found that entrepreneurs tend to
engage in R&D spending in the first year, tend to attract patents and
other forms of intellectual capital, and tend to attract venture
capital financing.\66\
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\66\ See Shah, Sonali K. and Winston Smith, Sheryl and Reedy, E.
J., ``Who are User Entrepreneurs? Findings on Innovation, Founder
Characteristics, and Firm Characteristics,'' The Kauffman Firm
Survey (February 2012), pp. 2-5, available at: http://
www.kauffman.org/~/media/kauffman_org/
research%20reports%20and%20covers/2012/02/
whoareuserentrepreneurs.pdf.
---------------------------------------------------------------------------
Immigrants have been central contributors to business ownership and
entrepreneurship in the United States and abroad. According to OECD
data, self-employment rates for immigrants are higher than those of the
native-born populations in many counties, including in the United
States.\67\ Based on the most recent data available from the U.S.
Census Bureau, 12.9 percent of the United States population was
foreign-born. Their rate of self-employment is about 30 percent higher
than that of the native-born population (7.7 percent vs. 5.9 percent;
n=1.8 million). The Census Bureau's 2012 Survey of Business Owners
showed that 14.4 percent of U.S. firms were owned by at least one
person not born a citizen of the United States.\68\ In sampling-based
studies, the SBA found a higher foreign-born ownership rate, at 16
percent, as did the German-based IZA Institute for the Study of Labor,
which put the rate at 18.2 percent.\69\
---------------------------------------------------------------------------
\67\ OECD, ``Migrant Entrepreneurship in OECD Countries,''
prepared by Maria Vincenza Desiderio (OECD) and Josep Mestres-
Dom[egrave]nech for the Working Party on Migration (2011), pp. 141-
144, available at: http://www.oecd.org/els/mig/Part%20II_Entrepreneurs_engl.pdf. This, and many other similar
studies and analyses are based on self-employment rates, which are a
proxy, but not perfect measure, of business ownership, because some
ownership structures such as partnerships, that could involve a
foreign-born owner, are generally not considered to be proprietary.
\68\ The categorization of ``foreign-born'' does not
differentiate between lawful permanent residents and naturalized
citizens. It also does not provide details of the firm history,
implying that some firms owned by persons not born in the United
States could have been founded by U.S. citizens and sold to foreign-
born persons.
\69\ See David M. Hart, Zoltan J. Acs, and Spencer L. Tracy,
Jr., ``High-tech Immigrant Entrepreneurship in the United States.'
Report developed under a contract with the Small Business
Administration, Office of Advocacy (2009), page 8, available at:
https://www.sba.gov/sites/default/files/advocacy/rs349tot_0.pdf. See
also Robert W. Fairlie and Magnus Lofstrom, ``Immigration and
Entrepreneurship,'' Institute for the Study of Labor (2013), p. 1,
available at: http://ftp.iza.org/dp7669.pdf.
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Many high-growth firms are involved in activities classified in the
STEM (science, technology, engineering, and math) fields. The high
concentration of immigrant entrepreneurs in these industries has gained
much attention. Between 2006 and 2012, one-third of companies financed
with venture capital that made an initial public offering had an
immigrant founder, a sharp rise from seven percent in 1980. These
companies have generated 66,000 jobs and $17 billion in sales.\70\ A
survey of entrepreneurs in technology-oriented privately held companies
with venture backing also showed about one-third were foreign born, and
61 percent held at least one patent.\71\
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\70\ This information is found from various sources and found in
Stuart Anderson, ``American Made 2.0. How Immigrant Entrepreneurs
Continue to Contribute to the United States Economy,'' National
Foundation for American Policy, sponsored by the National Venture
Capital Association (NVCA) (2013), pp. 3-7.
\71\ Id. at pp. 2-5.
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Further evidence points to similar findings. Between 1995 and 2005,
25 percent of science and technology focused businesses founded in the
United States had a foreign-born chief executive or lead technologist.
In 2005, those companies generated $52 billion in sales revenue and
employed 450,000 workers. In Silicon Valley, the share of immigrant-
founded start-ups increased to 52 percent by 2005. In 2006, foreign
nationals residing in the United States were involved (as inventors or
co-inventors) in about 26 percent of patent applications filed that
year. Immigrant founders of Silicon Valley firms tend to be highly
educated, with 96 percent holding bachelor's degrees and 74 percent
holding advanced degrees, and with 3-quarters of the latter in STEM
fields. As of 2010, more than 40 percent of the Fortune 500 companies
had been
[[Page 60155]]
founded by an immigrant or the child of an immigrant.\72\
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\72\ Vivek Wadhwa, ``Foreign-Born Entrepreneurs: An
Underestimated American Resource,'' Ewing Marion Kauffman Foundation
(2008), pp. 2-6, available at: http://www.kauffman.org/~/media/
kauffman_org/z_archive/article/2008/11/wadhwatbook09.pdf.
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To reiterate, high-growth firms tend to be new and young, and one
of their primary contributions to the highly dynamic labor market of
the United States has been through job creation. High-growth firms tend
to innovate and focus on developing new products and services. While no
evidence points to immigrant entrepreneurs outperforming native-born
entrepreneurs, the relatively intense involvement of immigrant
entrepreneurs in successful technology-driven activities suggests
substantial economic contributions. While measuring the precise value
and impact of innovation is difficult and still at a nascent stage in
research, many economists believe innovation creates positive
externalities and spillover effects that further drive economic
growth.\73\
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\73\ See ``SMEs, Entrepreneurship and Innovation,'' OECD (2010),
pp 26-28, available at: http://www.oecd.org/berlin/45493007.pdf.
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Notwithstanding the research on the positive effects of high-growth
entrepreneurship, there is some evidence of a long-term slowing in
start-up dynamism and entrepreneurial activity in the United States;
this trend began well over a decade ago, compelling many economists to
advocate for policies that attract more entrepreneurs in general.\74\
Many business entrepreneurial advocacy centers have also advocated in
recent years for the United States to enact a formalized pathway for
immigrant entrepreneurs. DHS is aware of one estimate of the potential
benefits of a theoretical start-up visa. A Kauffman Foundation study
(2013) estimated that, under certain conditions, a start-up visa could
create between 500,000 and 1.6 million new jobs after ten years.\75\
The potential benefits of attracting immigrant entrepreneurs have not
gone unnoticed internationally, as discussed earlier in the preamble.
Thirteen of the thirty-four nations who are part of the Organization of
Economic Cooperation and Development (OECD) have enacted special
immigration programs for entrepreneurs, although the eligibility
criteria vary among them to a significant extent.\76\
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\74\ See R. Decker et al, (2014), supra at N. 45, p. 16-22.
\75\ See Dane Stangler and Jared Konczal, ``Give Me Your
Entrepreneurs, Your Innovators; Estimating the Employment Impact of
a Startup Visa,'' Ewing Marion Kauffman Foundation, (February 2013),
pp. 1-3, available at: http://www.kauffman.org/~/media/kauffman_org/
research%20reports%20and%20covers/2013/02/
startup_visa_impact_finalsada. The estimates are based on a fixed
pool of 75,000 startup visas for a 10-year period, in which firm
deaths each year cycle some of visa to new entrants.
\76\ Most programs have been enacted after 2010. A country list
and some descriptive data can be found at Jean-Christophe Dumont,
``Investor Visas in OECD Countries,'' OECD Conference on Global
High-Skilled Immigration Policy The national Academies--Board on
science, technology and economic policy (2014), available at: http://sites.nationalacademies.org/cs/groups/pgasite/documents/webpage/pga_152202.pdf.
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3. Population of Entrepreneurs Potentially Eligible
DHS cannot precisely predict the volume of new businesses that
would start in the United States due to this rule. DHS has instead
examined available data to provide an estimate of the population of
individual entrepreneurs who may be eligible to request parole
consideration under this proposed rule. Given limits on DHS's
information about such entrepreneurs, DHS does not know how many people
within the estimated eligible population would actually seek such
consideration; as such, the estimates contained in this section
represent an upper bound to the size of the eligible population. DHS
estimated the population of entrepreneurs potentially eligible for
parole under this rule based on two sub-groups: (1) Foreign individuals
who seek to come to the United States to start a new business with
financial backing from a qualified U.S. investor; and (2) foreign
individuals who seek to come to the United States to start a new
business as recipients of U.S. funded and awarded research grants and
who intend to conduct the concomitant research in the United States.
DHS assumes that each member of the eligible population will start a
business and proposes that the general criterion for investment from a
qualified investor (e.g. venture capital firms, angel investors,
accelerators/incubators) be set at $345,000, while for government
grants or awards the general criterion would be $100,000. Based on
these amounts, DHS analyzed various past endeavors for the potential
sources of funds. DHS estimates that approximately 2,940 foreign
nationals annually could be eligible to apply for parole under this
proposed rule. Table 1 summarizes the analysis by source of funds.
Table 1--Number of Entrepreneurs Potentially Eligible
------------------------------------------------------------------------
Annual
Sub-group eligibility
------------------------------------------------------------------------
New foreign-owned firms funded with investment capital.. 2,105
New firms funded with U.S. grants or awards that could 835
potentially decide to locate to the United States......
---------------
Total............................................... 2,940
------------------------------------------------------------------------
DHS has no way of predicting with certainty the actual number of
foreign nationals who would seek parole under this proposed rule over
time, as the size of the eligible population could change
significantly. DHS acknowledges that the estimate of individuals
applying annually is an approximation based on past foreign ownership
and start-up capital amounts. The analysis utilized to estimate the
potential eligible population is also based implicitly on assumptions
that: (1) The rule, if finalized, will not significantly change the
frequency of U.S. funded grant applications from foreign researchers;
and (2) that the rule, if finalized, will not significantly affect the
market for foreign entrepreneurs and the market for the types of
investment structures the rule will involve. Based on these assumptions
and the data limitations, DHS projects that for the first full year
that the rule would be effective, and for the second year, annual
eligibility will be approximately 2,940.\77\ The next section provides
key data and analytical approaches utilized to arrive at the population
estimates. DHS first considers volume estimates based on official U.S.
data. The resulting estimates based on official data are those utilized
for the cost projections of the proposed rule. Due to particular
constraints in the data, DHS follows with an alternative method of
volume
[[Page 60156]]
estimation that adds robustness to the official estimate.
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\77\ DHS emphasizes that the total is a broad estimate, as the
Department has no means to determine the demand for entrepreneurial
parole, changes in the eligible population that the rule may cause,
time-variant possibilities, and application preferences. These
conditions could change, if, for example, some foreign researchers
see parole as attractive and apply for federally funded grants that
they otherwise might not have in the absence of the rule. In
addition, volume estimates should be interpreted to apply to only
initial applications, not considerations for re-parole at some
future point in time. Lastly, the market for the types of
investments involved, such as venture capital, are fluid and
becoming more global in scope. DHS has no means to determine how the
evolution of these investment markets will affect, or be affected by
the proposed rule.
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Volume Projections Data and Methodology
A. Grants
Because U.S.-funded research grants may be a qualifying investment
under this rule, DHS obtained publicly available data on federally
funded grants for fiscal years 2013-2015.\78\ Although numerous
agencies within the Federal Government award grants to foreign-born
individuals, most are humanitarian or development focused.\79\ For this
reason DHS parsed the very large data set comprising 1.7 million
records to obtain a viable analytical cohort. First, the records were
filtered to capture Federal Government agencies that award grants to
both United States and foreign-born recipients. Secondly, the records
were sorted to only include the Federal Government agencies that award
grants focused on ``projects,'' thereby excluding block and assistance
grants.\80\ The foreign-born cohort used for the eligibility
projections excluded grants made to recipients in U.S. territories, as
such recipients may be subject to special considerations outside the
parole parameters.\81\ DHS also excluded grant amounts recorded as
negative, zero, and trivial amounts of less than $1,000--such values
were recorded if grants were rescinded or for some other reason not
ultimately funded. On average, 138,447 grants comprised the annual
resulting analytical cohort derived from the above filtering
procedures. Of that total, a small portion, 2,043 grants, or 1.5
percent, were awarded to foreign-born individuals. Having determined a
reasonable eligibility threshold of $100,000, DHS proceeded to the next
step, to determine the potential annual eligible population of grant-
sourced researchers. Over the period of analysis, 41 percent of the
Federal grants awarded to foreign recipients equaled or surpassed the
$100,000 benchmark, for an average of 835 annually.
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\78\ The data were obtained from USASpending.gov: https://www.usaspending.gov/Pages/Default.aspx. From the homepage, the data
can be accessed from the linked ``data download'' section. The files
were obtained on April 20, 2015.
\79\ It is certainly the case that U.S. State governments and
other governmental entities issue research grants that foreign
recipients could potentially utilize for parole eligibility.
However, DHS is not aware of any database that collects and provides
such data publicly.
\80\ The Federal entities that awarded scientific focused
research to foreign recipients were: Agricultural Resource Service,
National Institute of Health, Center for Disease Control, Food and
Drug Administration, Department of Defense, National Aeronautics and
Space Administration, National Oceanic and Atmospheric
Administration, National Institute of Standards and Technology,
National Science Foundation. The U.S. Department of State and Agency
for International Development (USAID) were excluded from the
analysis.
\81\ There is a particular way in which the data germane to
foreign grants were parsed and analyzed. There are two possible
foreign indicators listed for each grant. One is the ``principal
place'' involving the research and the other is the ``recipient
country.'' The incumbent volume projections are based on the latter
because this indicator generally implies that the grant was made to
a person or institution outside the United States. The former is not
used because this indicator could apply to grants awarded to U.S. or
foreign persons in order to conduct the ensuing research outside the
United States. Implicit in this analysis is that persons awarded
U.S. funded grants that are overseas could conduct their research
and innovation in the United States, and are not otherwise precluded
from doing so, even if the focus of such research is in a foreign
country.
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B. Investment Capital
To estimate the number of potential new entrepreneurial start-ups,
DHS obtained and analyzed data from the BLS and the Census Bureau. From
the BLS Business Employment Dynamics (BED) data suite, DHS obtained the
number of private establishments aged 1 year or less for nine broad
sectors likely to be involved in innovative activity, in order to focus
on entrants.\82\ Although a reasonable proxy, the number of
establishments aged 1 year or less is not a perfect measure of firm
start-ups (births). The chosen metric may overstate births, by
including expansions and new franchises of existing businesses.
Conversely, it may understate the actual number of start-ups, because
some fraction of firms does not survive the first year (the data are
tabulated in March of the respective year such that the establishments
aged 1 year and less are those that opened within the previous year but
remained in business as of March of the following year), and those that
opened in the previous year and were still in business but had not
reached 2 years of age. DHS utilized the relevant figure for March
2015, because the latter is the most recent figure reported in the BED
dataset.
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\82\ The BLS data is found at http://www.bls.gov/bdm/bdmage.htm.
DHS utilized the ``Establishment age and survival BED data for
nation by major industry'' set and figures from Table 5, ``Number of
private sector establishments by age,'' for the nine major sectors
shown in Table 2, above. The BLS does provide figures on firm births
that could be used in the present analysis. However, DHS chose
establishment age data because it is broken down in a way that
corresponds precisely to the innovating sectors, discussed below.
The firm birth data is not categorized in the exact same manner. The
nine major sectors were chosen to envelope the approximately 430
individual activities that DHS considers to involve ``science,
technology, engineering, and math'' (STEM).'' The full list based on
the 2012 update can be found at: http://www.ice.gov/sites/default/files/documents/Document/2014/stem-list.pdf.
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For each sector, DHS obtained the corresponding share of firms
owned by a person ``born a citizen of the United States'' from the
Census Bureau's Survey of Business Owners data set.83 84 For
brevity, we utilize the term ``foreign'' here to describe such firms.
The foreign share was obtained by dividing the number of foreign-owned
private firms in a sector by the total number of reporting firms in the
same sector. This share applies to firms that have a least one owner
who was not born in the United States but does not differentiate
between various types of ownership structures. The figure for new firms
obtained from the BLS BED data was multiplied first by the foreign
share to generate an estimate of firms per sector started by a person
not born in the United States.
---------------------------------------------------------------------------
\83\ The Census SBO data are found at: http://www.census.gov/data/tables/2012/econ/sbo/2012-sbo-characteristics.html. The foreign
ownership figures per sector are found under ``Characteristics of
Business owners,'' Table SB1200CSBO11: ``Statistics for Owners of
Respondent Firms by Whether the Owner Was Born in the United States
by Gender, Ethnicity, Race, and Veteran Status for the U.S.'' and
the startup capital data are found under Characteristics of
Businesses, Table SB1200CSB16: ``Statistics for All United States
Firms by Total Amount of Capital Used to Start or Acquire the
Business by Industry, Gender, Ethnicity, Race, and Veteran Status
for the United States: 2007.'' The foreign ownership share of firms
is provided in the table and thus did not need to be calculated by
DHS. The SBO data are part of the 2012 survey for which data was
released publicly between February and June 2016.
\84\ A possible source of upward bias in the foreign ownership
share and hence the estimate of eligible entrepreneurs is that this
share does not differentiate between foreign owners who came to the
United States to open a business and those who acquired one after
being in the United States for some period of time (e.g., lawful
permanent residents or naturalized citizens). A general finding
among a large literature on this topic is that many foreign-born
business owners were driven to start a business by ``push'' factors
in the labor market after arrival in the United States. DHS does not
have a means to parse out the ownership rate in a more granular way
to account for such differences.
---------------------------------------------------------------------------
Next, DHS attempted to calculate how many of the firms were started
with at least $345,000, the minimum investment threshold that the rule
proposes. The SBO data provides ranges of such startup capital amounts
but DHS could not conduct a precise estimate because the data does not
provide a category bound by the threshold minimum. In fact, the
encompassing tranche is very large, from $249,500 to $1 million in
range. The SBO does not provide actual cohort data or other information
from which DHS could evaluate the distribution and, therefore, DHS has
no way of ascertaining how many firms in this large range would occupy
the $345,000 to $1 million
[[Page 60157]]
segment. As a result, DHS relied on the share of firms in this tranche
and the additional tranches over $1,000,000 relative to the share of
all firms reporting for the sector, and recognizes that the volume
projection is likely larger than is realistic. An additional assumption
is that the startup threshold is the same for businesses with native
and foreign-born founders. The relevant data and estimates per sector
are shown in Table 3.
Table 3--Summary of Entrepreneur Estimates
----------------------------------------------------------------------------------------------------------------
Foreign share Start-up Annual
Sector New firms (%) threshold (%) eligible
----------------------------------------------------------------------------------------------------------------
Agriculture..................................... 10,182 4.9 2.5 12
Utilities....................................... 1,204 10.8 5.5 7
Manufacturing................................... 29,883 11.0 5.4 178
Information..................................... 22,855 11.9 2.0 55
Professional Services *......................... 165,425 12.8 1.2 248
Management...................................... 7,334 7.3 20.2 108
Waste Services.................................. 66,161 16.4 0.9 94
Education....................................... 15,226 11.9 0.7 13
Health Care..................................... 210,977 18.0 3.7 1,391
---------------
Total....................................... .............. .............. .............. 2,105
----------------------------------------------------------------------------------------------------------------
* Abbreviation for ``Professional, Scientific, and Technical Services''.
C. An Alternative Estimate of Entrepreneurs Based on Investment
Structures
DHS recognizes the imperfections in estimating the potential
population of eligible entrepreneurs based on extrapolating past
conditions of foreign ownership rates and capital thresholds--and
specifically, a lack of a demarcation threshold of $345,000--but this
approach provides a reasonable approximation of the upper bound of the
eligible population in light of the significant data limitations and
the uncertainty involved with estimating future entrepreneurial
activity. The main benefit of this method is that it is based on
official data; a limitation is that it assumes that the annual crop of
firms created are entrepreneurial and the types of firms covered by the
parole process in the proposed rule. In practice, some, but not all,
will be innovators, even though the present analysis focuses on the
sectors of the economy linked to STEM activity (DHS is not aware of any
methods or data that can allocate a research-innovation share of firms
to each sector). Because the volume projections are derived from
information obtained from official sources--the BLS and Census Bureau--
DHS retains them for purposes of the costs and volume estimates of the
proposed rule. However, DHS believes that an alternative method of
estimation will inform readers and strengthen the regulatory analysis,
by providing a viable comparison to the official projections. In this
alternative approach, DHS focuses on the types of investment structures
and ventures likely to be involved in the proposed parole process.
Specifically, DHS believes that there will be three primary sources of
investment for innovative firms (excluding research grants, which are
not addressed in this alternative estimate): Venture capital firms,
angel investors, and business accelerators and incubators
(``incubators'' for brevity, henceforth).\85\ Hence, by analyzing the
foreign component of these structures, data permitting, an alternative
estimate of entrepreneurs can be obtained for comparison purposes.
---------------------------------------------------------------------------
\85\ DHS is aware that in recent years alternative sources of
financing for new and young firms, such as crowdsourcing and
merchant cash advances (MCA), to name just two, have become relevant
and common in types of industries, and recognizes that such capital
could finance the types of foreign established firms that parole
under this rule is intended to involve. However, at present, DHS is
not aware of sufficient data concerning these new alternative
methods to include them in the context of the present analysis.
---------------------------------------------------------------------------
As is the case with the official estimates, this alternative
method, which focuses on innovative firms and investment types, also
suffers from limitations. Foremost, DHS recognizes uncertainty around
utilization rates, i.e. how many potential entrepreneurs among the
estimated eligible population would actually seek parole under the
proposed rule. Second, there is potential overlap in these structures;
for example, firms under incubation often receive angel financing and
some firms receive both angel financing and venture capital. However,
since DHS does not have data to separate out such capital infusions,
each of the three investment types is treated as distinct.
For venture capital, DHS consulted the National Venture Capital
Association (NVCA) 2016 yearbook. This yearbook provides the number of
annual seed venture investments. The data reveal that between 2013 and
2015, an average of 169 first sequence seed investments were made,
which DHS considers to be new firms financed with venture capital.\86\
To estimate the eligible share of these venture capital backed firms,
DHS relied on the finding that about one third of venture financed
companies involved a foreign born owner or founder.\87\ Based on this
share, approximately 56 firms and individuals (assuming each firm would
have one foreign individual) annually would be eligible for parole
(obtained by multiplying the annual average of 169 seed investments by
0.33). This estimate embodies the assumption that all of the seed
venture investments are above the investment threshold.\88\
---------------------------------------------------------------------------
\86\ The NVCA yearbook is found at: http://nvca.org/research/stats-studies/. The figures utilized are found in Figure 3.23,
``First Sequence by Stage of Development (Number of Deals). ``First
sequence'' venture finance typically describes the round that is in
the early stage following the start-up round. It is generally the
capital investment round linked to producing and selling the firm's
product.
\87\ This figure is found in ``American Made 2.0. How Immigrant
Entrepreneurs Continue to Contribute to the United States Economy,''
National Foundation for American Policy, sponsored by the National
Venture Capital Association (NVCA) (2013), pp. 3-7, available at
http://www.nfap.com/pdf/American%20Made%202.0.Final.pdf.
\88\ Information from the financial services advisory firm Ernst
& Young indicates that the median venture capital round for startups
is $900,000 based on the average for 2013-2014, and the median seed
round is $850,000. Data in a report in Inc. indicates that median
venture capital seed round is $1.05 million based on the period
2013-2015. The information can be found at: http://www.ey.com/
Publication/vwLUAssets/Venture_Capital_Insights_4Q14_-_January_2015/
$FILE/ey-venture-capital-insights-4Q14.pdf and at http://www.inc.com/linkedin/tomasz-tunguz/inflation-deflation-startup-fundraising-market-tomasz-tunguz.html, in order. Although the terms
``seed'' and ``startup'' can be convoluted, generally seed rounds
preceded startup finance sequentially. Seed typically ``refers'' to
capital utilized to found the firm and initialize concept and
product development while ``startup'' generally refers to new
capital utilized to support initial production and operations.
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[[Page 60158]]
To obtain an incubator estimate, DHS obtained publicly available
information from SeedDb, which provides data on U.S. incubators
collected from industry associations and fee-based data providers,
including CB Insights and Crunchbase, which are two of the largest data
providers for venture capital, angel investors, and accelerators.\89\
The data are not collated in a way amenable to conducting a cohesive
firm-by-firm or firm-wide analysis, but a DHS review of the available
data indicates that the date range of firms included is about 2006-2016
(as of the last DHS data pull on March 20, 2016). The total number of
firms is 6,248, yielding an annual average over 11 years of 568. Since
all of these firms had to enter incubation at some point in the 11-year
period, 568 is a reasonable estimate of the average number of firms
entering incubation per year. One of the data suites lists the total
number of companies incubated for each incubator and the countries that
the companies were located in. Since there is wide variation in the
number of companies per incubator, ranging from 1 to over a thousand,
DHS grouped the incubators by country and then weighted each one for
its share of total companies. The resulting weighted average indicates
that one quarter of incubated companies were foreign.\90\ Applying the
25 percent foreign share to the annual 568 firms, DHS estimates that
about 144 firms could be eligible annually. DHS expects that not all
foreign firms that enter incubation will meet the $345,000 investment
threshold, but because DHS will potentially consider other factors for
such firms, a threshold rate is not applied to the estimate for
purposes of this analysis.
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\89\ The SeedDB information is found at the Web site is://
www.seed-db.com/.
\90\ This foreign share found by DHS in the analysis corresponds
strongly to a finding in a study of high technology firms that found
that 24 percent of such firms were founded by a foreign born person.
See ``America's New Immigrant Entrepreneurs,'' Vivek Wadhwa, AnnaLee
Saxenian, Ben Rissing, and Gary Gereffi, available at: http://
people.ischool.berkeley.edu/~anno/Papers/
Americas_new_immigrant_entrepreneurs_I.pdf.
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Having estimated 56 venture firms and 144 incubator firms as
potentially eligible, DHS next estimated the largest source of startup
investment, angel investors. Based on the most recent data from the
Center for Venture Research, about 25 percent of angel investments are
made at the seed and startup stage. For the 71,000 companies receiving
angel financing per year, about 17,750 could be considered new, which
compares favorably to other, unrelated sources that note that about
16,000 new firms are financed with angel investments per year.\91\
---------------------------------------------------------------------------
\91\ This figure is reported in, among other sources: http://www.angelblog.net/Angels_Finance_27_Times_More_Start-ups_Than_VCs.html and http://www.entrepreneurship.org/emed/angel-investing-versus-venture-capital-part-i.aspx.
---------------------------------------------------------------------------
DHS used the 17,750 annual figure for angel backed startups and
multiplied that number by the same 25 percent rate for foreign
identifiers found in the SeedDB data. DHS is aware that many angel
investments are made at low levels and that there is a wide range of
such investment amounts. DHS does not have publicly available data in
which to analyze a distribution of angel backed firms, and operates
under the assumption that the $345,000 average is also the median, as
is the case for a normal distribution. DHS multiplied the resulting
foreign cohort by 0.5. The result of these extrapolations yields a
figure of 2,151, which is an estimate of the potential population of
eligible new firms annually financed by angel investments. By adding
the three investment-type estimates together--144 incubator firms, 56
venture-backed firms, and 2,151 angel-backed firms--the resulting sum
is 2,351. While uncertainties and limitations of the data involved in
the volume estimates have been enunciated in detail, the closeness of
this estimate to the 2,105 figure based on the Census and BLS data,
adds robustness and confidence to the official estimate utilized in the
cost projections.
D. Potential Variability in the Volume Projections
This section discusses several potential cohorts involving
entrepreneurial activity that is difficult to estimate.
In light of the potential benefits to the U.S. economy and job
creation, DHS is proposing this rule to provide a mechanism that,
consistent with the requirements of the INA, encourages foreign
entrepreneurs described herein to form and create innovative firms in
the United States. In 2011, DHS began outreach and stood up the
Entrepreneurs in Residence initiative to try to encourage
entrepreneurship among foreign nationals.\92\ DHS began tracking the
number of foreign nationals who indicated interest in starting up an
entrepreneurial endeavor at some point during their admission as an H-
1B nonimmigrant. Over the past four fiscal years (FY 2010-2013), an
average of 77 foreign nationals have indicated such interest. In light
of the relatively small numbers of foreign nationals who indicated
their entrepreneurial intentions, DHS believes that considering parole
requests under this rule will promote further innovation and other
economic benefits in addition to those created by existing programs and
policies used by foreign nationals to pursue high-growth
entrepreneurial activity in the United States. If the rule is
finalized, there could be some small substitution effects as some
portion of this cohort could switch to seeking parole instead of
relying on other existing nonimmigrant programs and policies. However,
DHS does not believe such substitution would occur on a large scale
because the ability to be admitted to the United States as a
nonimmigrant offers materially more benefits and protection than
parole.
---------------------------------------------------------------------------
\92\ Source: USCIS Announces ``Entrepreneurs in Residence
Initiative'' available at: http://www.uscis.gov/news/public-releases-topic/business-immigration/uscis-announces-entrepreneurs-residence-initiative. See also http://www.uscis.gov/eir/visa-guide/entrepreneur-visa-guide.
---------------------------------------------------------------------------
In addition, the proposed rule lists a number of ancillary
conditions for eligibility--and conversely a number of conditions that
would leave individuals unlikely or unable to be paroled into the
United States (or continue to be paroled in the country). Because
ancillary conditions can be considered for eligibility, the actual
volume may be larger than the estimates herein. Two examples are that
under the proposed rule, applicants must maintain household income
greater than 400 percent of the poverty line and that the qualifying
start-up capital cannot come from family members. The volume estimates
presented in this analysis assume all ancillary eligibility conditions
are met.
Finally, two potential elements of the eligible population are
considered. First, as alluded to in the summary, the volume estimates
and ensuing cost estimates assume one individual owner for each new
firm; under the proposed rule, DHS would allow up to three individuals
per firm to seek parole but does not attempt to estimate how many of
the startups could have more than one owner. Second, the volume
estimate for grants is based on Federal awards only. DHS will consider
eligibility based on State or local grants and awards, including those
from State or local Economic Development Corporations (EDCs). Although,
unlike in the case of Federal awards, there is not a database capturing
State and local grants or the transmission mechanisms through which
some Federal grants are distributed to other entities, such as EDCs.
[[Page 60159]]
4. Costs
A. Principal Filer Costs
The proposed rule would permit certain foreign nationals to apply
for a 2-year initial period of parole into the United States provided
they meet the proposed eligibility criteria. Those who seek such parole
into the United States would face the costs associated with the
application, which involve a $1,200 application fee plus other costs,
detailed below. The costs would stem from filing fees and the
opportunity costs of time associated with filing the Application for
Entrepreneur Parole, Form I-941.
The proposed filing fee for Form I-941 is $1,200. The fee is set at
a level intended to recover the anticipated processing costs to
DHS.\93\ In addition, DHS is proposing that applicants for parole as an
entrepreneur submit biometrics and incur the $85 biometric services
fee. Because entrepreneurs could start firms in any number of
occupations, DHS believes it is appropriate to utilize the mean hourly
wage for all occupations, which is $22.71.\94\ In order to anticipate
the full opportunity cost to petitioners, DHS multiplied the average
hourly U.S. wage rate by 1.46 to account for the full cost of employee
benefits such as paid leave, insurance, and retirement, for a total of
$33.16 per hour.
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\93\ USCIS calculates its fees to recover the full cost of USCIS
operations, including meeting national security, customer service,
and adjudicative processing goals. As with other fees, USCIS uses
Activity Based Costing (ABC) to assign costs to specific benefit
requests. This model uses completion rates (actual or estimated
depending on whether the benefit type is already being adjudicated)
to calculate a proposed fee or fee adjustment for a benefit type. A
completion rate reflects an average time an adjudicator spends
actually working on a case but does not include ``queue'' or wait
times. Because parole under this proposed rule has not yet been
implemented, the completion rate used is based on a 4-hour estimate
provided by USCIS' subject matter experts. At this time, USCIS has
estimated that 30 additional staff would be required to satisfy the
forecasted workload associated with this rule. However, USCIS
requires adjudicators to report actual adjudication hours and case
completions by benefit type. This reporting will occur after this
rule is implemented. Adjudication hours will be divided by the
number of completions for the same time period to determine the
actual average completion rate. This rate will be used in future fee
adjustments and will help determine future staffing allocations
necessary to handle the projected workload for parole under this
proposed rule.
\94\ See National Occupational Employment and Wage Estimates
United States. May 2014. Department of Labor, Bureau of Labor
Statistics, Occupational Employment Statistics program. Available at
http://www.bls.gov/oes/2014/may/oes_nat.htm.
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DHS estimates that the proposed application would take 1.33 hours
to complete. After DHS receives the application and fees, if the
applicant is physically present in the United States, USCIS will send
the applicant a notice scheduling him or her to visit a USCIS
Application Support Center (ASC) for biometrics collection. Along with
the $85 biometric services fee, the applicant would incur the following
costs to comply with the proposed biometrics submission requirement:
The opportunity cost of traveling to an ASC, the mileage cost of
traveling to an ASC, and the opportunity cost of time for submitting
his or her biometrics. While travel times and distances vary, DHS
estimates that an applicant's average roundtrip distance to an ASC is
50 miles, and that the average time for that trip is 2.5 hours. DHS
estimates that an applicant waits an average of 1.17 hours for service
and to have his or her biometrics collected at an ASC, adding up to a
total biometrics-related time burden of 3.67 hours.\95\ By applying the
$33.16 hourly time value for applicants to the total biometrics-related
time burden, DHS finds that the opportunity cost for a principal
applicant to travel to and from an ASC, and to submit biometrics, would
total $121.68.\96\ In addition to the opportunity cost of providing
biometrics, applicants would experience travel costs related to
biometrics collection. The cost of such travel would equal $28.75 per
trip, based on the 50-mile roundtrip distance to an ASC and the General
Services Administration's (GSA) travel rate of $0.575 per mile.\97\ DHS
assumes that each individual would travel independently to an ASC to
submit his or her biometrics, meaning that this rule would impose a
time cost on each of these applicants.
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\95\ Foreign nationals who submit their applications from
outside the United States would still be required to pay the $85
biometric processing fee and travel to a USCIS office abroad, if
available, or a U.S. embassy or consulate office for biometric
processing. Due to data limitations, and to capture general impacts
of the rule, DHS has estimated costs of submitting biometrics under
the assumption that all applicants are traveling to an ASC in the
United States.
\96\ Calculation: $33.16 * 3.67 hours = $121.68.
\97\ Calculation: 50 miles multiplied by $0.575 per mile equals
$28.75. See 79 FR 78437 (Dec. 30, 2014) for GSA mileage rate.
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DHS estimates that each principal parole applicant would incur the
following costs: $1,285 in filing fees to cover the processing costs
for the application and biometrics; $194.53 after summing the monetized
cost of travel to submit biometrics, the total opportunity costs of
time of the initial applications, biometrics, and estimated travel
costs, resulting in a total cost of $1,479.53 per application, rounded
to $1,480.\98\ If DHS receives 2,940 applications from persons eligible
to apply, DHS anticipates that such applications would result in annual
filing fee transfers of $3,777,900 (undiscounted), which comprise the
application fee and cost of submitting biometrics, and opportunity and
other burden costs of $571,927, for a total annual cost of $4,349,827.
Any subsequent renewal of the parole period or material changes
requiring the filing of an amended application would result in costs
similar to those previously discussed, with the possible exception of
travel costs, since the applicant would not be required to depart the
United States and re-enter.
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\98\ Calculation: $1,285 + 194; $1,285 is the sum of the direct
cost of the $1,200 filing fee and the $85 cost of biometrics. The
$194 (rounded) figure is obtained by adding the cost of travel
($28.75) plus the total opportunity cost of $166, the latter of
which is the product of the total time burden (5 hours) and the
average burdened hourly wage ($33.16).
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B. Dependent Spouses and Children
The proposed rule would require all dependent family members
(spouses and children) accompanying or joining the entrepreneur to file
a Form I-131, Application for Travel Document, and would require all
spouses and children 14 years of age through age 79 to submit
biometrics. Those spouses and children would face the costs associated
with filing the application and submitting biometrics.
DHS recognizes that many dependent spouses and children do not
currently participate in the U.S. labor market, and as a result, are
not represented in national average wage calculations. In order to
provide a reasonable proxy of time valuation, DHS has to assume some
value of time above zero and therefore uses an hourly cost burdened
minimum wage rate of $10.59 to estimate the opportunity cost of time
for dependent spouses. The value of $10.59 per hour represents the
Federal minimum wage with an upward adjustment for benefits.\99\ The
value of $10.59 per hour is consistent with other DHS rulemakings when
estimating time burden costs for those who are not authorized to
work.\100\
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\99\ U.S. Department of Labor, Wage and Hour Division. The
minimum wage in effect as of July 24, 2009. Available at http://www.dol.gov/dol/topic/wages/minimumwage.htm. The calculation for
total employer costs for employee compensation for dependent spouses
and children of principals with an approved Form I-140: $7.25 per
hour x 1.46 = $10.59 per hour.
\100\ See ``Employment Authorization for Certain H-4 Dependent
Spouses; Final rule,'' 80 FR 10284 (25 Feb. 2015); and ``Provisional
and Unlawful Presence Waivers of Inadmissibility for Certain
Immediate Relatives; Final Rule,'' 78 FR 536, 572 (3 Jan. 2013).
---------------------------------------------------------------------------
DHS would require dependents of parole applicants (spouses and
children
[[Page 60160]]
of the parole applicant) to file an Application for Travel Document
(Form I-131) in order to be scheduled for biometric submission. There
is a $360 filing fee associated with Form I-131, and DHS estimates it
will take 3.56 hours to complete each submission. In addition to filing
the Form I-131, each dependent spouse and child 14 years of age and
over would be required to submit biometric information (fingerprints,
photograph, and signature) by attending a biometrics services
appointment at a designated USCIS Application Support Center (ASC). The
biometrics processing fee is $85.00 per applicant. In addition to the
$85 biometrics services fee, the applicant would incur the following
costs to comply with the biometrics submission requirement: The
opportunity and mileage costs of traveling to an ASC, and the
opportunity cost of submitting his or her biometrics. While travel
times and distances vary, DHS estimates that an applicant's average
roundtrip distance to an ASC is 50 miles, and that the average time for
that trip is 2.5 hours.\101\ DHS estimates that an applicant waits an
average of 1.17 hours for service and to have his or her biometrics
collected at an ASC, adding up to a total biometrics-related time
burden of 3.67 hours. In addition to the opportunity cost of providing
biometrics, applicants would experience travel costs related to
biometrics collection. The cost of such travel would equal $28.75 per
trip, based on the 50-mile roundtrip distance to an ASC and the General
Services Administration's (GSA) travel rate of $0.575 per mile.\102\
DHS has assumed that each applicant would travel independently to an
ASC to submit his or her biometrics, meaning that this rule would
impose a time cost on each of these applicants. DHS also assumed all
children were over the age of 14 for the purposes of this analysis and,
therefore, this cost estimate may be slightly overestimated.
---------------------------------------------------------------------------
\101\ DHS has estimated travel distances and ensuing travel
times at 2.5 hours in prior rulemakings. See, e.g., ``Employment
Authorization for Certain H-4 Dependent Spouses; Final rule,'' 80 FR
10284 (25 Feb. 2015); and ``Provisional and Unlawful Presence
Waivers of Inadmissibility for Certain Immediate Relatives; Final
Rule,'' 78 FR 536, 572 (3 Jan. 2013).
\102\ See U.S. General Services Administration Web site for
Privately Owned Vehicle (POV) Mileage Reimbursement Rates, http://www.gsa.gov/portal/content/100715 (accessed August 8, 2015).
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DHS projects that approximately 3,234 dependents would be required
to file a Form I-131 and submit biometrics, based on the estimate of
2,940 principal applicants and using a multiplier for expected family
members of 1.1.\103\ The total cost for those spouses and children
requesting parole under this program includes the filing fee,
biometrics processing fee, travel costs associated with biometrics
processing, and the opportunity cost of filing the Form I-131 and
submitting biometrics. The total time burden is 7.23 hours. At the
cost-burdened wage, the total opportunity cost is $76.53. Adding the
$28.75 cost of travel, the total non-filing cost is estimated to be
$105.78, and the total cost per applicant is $550. At the projection of
3,234 applicants, the non-filing cost is $340,474 (undiscounted), and
combined with filing costs of $1,439,130, the total estimated cost for
dependents germane to Form I-131 is $1,779,604.
---------------------------------------------------------------------------
\103\ The multiplier of 1.1 was obtained from DHS estimates of
the average historical ratio of principal versus dependent
recipients of LPR status. DHS studies based on statistics obtained
from office of Immigration Statistics reveal that multipliers for
the employment preference categories EB-1, EB-2, and EB-3 range from
2.04 to 2.27. DHS believes that 2.1. is a reasonable multiplier for
the estimates and utilized this multiplier in regulatory assessments
involved in American Competitiveness in the Twenty-First Century
Act, (AC21) provisions, specifically: ``Retention of EB-1, EB-2, and
EB-3 Immigrant Workers and Program Improvements Affecting High-
Skilled Nonimmigrant Workers'' (RIN 1615-AC05), proposed rule.
Because the Form I-131 filings relevant to this rule do not apply to
principals, only spouses and dependent children, DHS believes it is
valid to subtract 1 from the 2.1 multiplier to yield the final
multiplier of 1.1.
---------------------------------------------------------------------------
In addition, DHS proposes to allow unrestricted employment
authorization for spouses of entrepreneurs granted parole under this
rule. DHS proposes to permit these individuals to apply for employment
authorization by filing Form I-765. To estimate the number of potential
persons applying for employment authorization, DHS used a simple one-
to-one mapping of entrepreneurs to spouses to obtain 1,813 spouses, the
same number as entrepreneur parolees.
The current filing fee for Form I-765 is $380.00. The fee is set at
a level to recover the processing costs to DHS. Based on the projection
of 2,940 applicants, the total filing cost is $1,117,200
(undiscounted). DHS estimates the time burden of completing Form I-765
is 3.42 hours.\104\ At the cost-burdened wage, the total opportunity
cost is $36.20. At the projection of 2,940 applicants, the non-filing
cost is $106,430 (undiscounted) and combined with filing costs of
$1,117,200, the total estimated cost for spouses germane to Form I-765
is $1,223,630.
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\104\ Source: Paperwork Reduction Act (PRA) Supporting Statement
for Form I-765 (OMB control number 1615-0040). The PRA Supporting
Statement can be found at Question 13 on Reginfo.gov at http://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201502-1615-004.
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In addition to the filing costs, applicants for parole may face
other costs associated with their entrepreneurial activities. These
could include the administrative costs of starting up a business,
applying for grants, obtaining various types of licenses and permits,
and pursuing qualified investments. However, these costs apply to the
entrepreneurial activity and the business activity that the applicant
has chosen to be involved in and are not driven by the parole process
or other governmental functions attributable to the rule itself. Hence,
DHS does not attempt to estimate, quantify, or monetize such costs.
Lastly, DHS recognizes that some individuals who were lawfully
admitted in the United States in certain nonimmigrant classifications
may seek parole. They would thus apply for parole and, if approved,
exit the United States and request to be paroled into the United States
at a port of entry, as parole will not involve any direct change from
other nonimmigrant status. Such applicants would bear the travel costs
of exit and returning to a port of entry. However, because there are no
similar programs for comparison, DHS cannot determine the demand for
parole or substitution effects from other classifications and thus
cannot estimate, quantify, or monetize such potential travel costs.
Finally, because the program allows for re-parole under conditions that
DHS has set, entrepreneurs and their spouse and children, if
applicable, would likely face filing and opportunity costs associated
with applying for re-parole. However, DHS has no means of estimating
the share of the potential eligible population that would seek and be
eligible for re-parole, hence re-parole conditions are not included in
this analysis. In summary, DHS believes that it is possible that there
could be some substitution into the proposed parole program from other
programs and such applicants and dependents would incur travel and
possible other costs related to exit and re-entry.
C. Potential for Negative U.S. Labor Market Impacts
DHS does not expect the rule to generate significant costs or
negative consequences. Extensive review of information relevant to
immigrant entrepreneurship indicates that while much about the impact
of such entrepreneurship is not known, there is no reason to expect
that substantial negative consequences, including adverse impact on
domestic workers,
[[Page 60161]]
are likely. The possibility that immigrant entrepreneurs may displace
(``crowd-out'') native entrepreneurs has been raised by a few
researchers. One study indicated that a very small number of native
entrepreneurs were possibly displaced by immigrant entrepreneurs.\105\
However, because of difficulties in controlling for a large amount of
variables related to entrepreneurship, other researchers have noted
that this finding only raises the possibility that displacement could
not be ruled out completely, but did not actually provide irrefutable
evidence that it had occurred.\106\ Another study, conducted by the
Brookings Institution, did not find displacement but acknowledged that
more research and refined control techniques, along with longitudinal
data, would need to be studied before ruling out the possibility
completely.\107\ In any event, the purpose of the proposed parole rule
is to foster innovation and entrepreneurial activities in new or very
young endeavors, where the literature much more decisively indicates a
strong potential of creating new net jobs for U.S. workers, offsetting
any potential negative impacts for this group.
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\105\ Fairlie, R. W., and B. D. Meyer. ``The effect of
immigration on native self-employment.'' Journal of Labor Economics
21:3 (2003): 619-650, available at: http://people.ucsc.edu/
~rfairlie/papers/published/jole%202003%20-%20native%20se.pdf.
\106\ See Magnus Lofstrom, ``Immigrants and Entrepreneurship,''
Public Policy Institute of California, USA, and IZA, Germany (2014),
p. 4, available at: http://wol.iza.org/articles/immigrants-and-entrepreneurship.pdf.
\107\ See Zoltan J. Acs and David M. Hart, ``Immigration and
High-Impact, High-Tech Entrepreneurship,'' Brookings, Issues in
Technological innovation (February 2011), available at http://www.brookings.edu/research/papers/2011/02/immigration-hart-acs.
---------------------------------------------------------------------------
DHS recognizes that the potential inclusion of spouses can incur
labor market implications and possibly impact U.S. workers. As was
noted in previous sections of the regulatory impact analysis, DHS did
not attempt to assess or measure the labor market impact of the
estimated entrepreneurs potentially eligible for parole because as
founders of firms, these persons would not affect the labor market in
the same way as other workers. Although spouses could have labor market
impacts as new labor market entrants, DHS believes such potential
impacts will be negligible. The main reason is that the size of the
potential new cohort is very small. As of the end of 2015, there were
an estimated 157,130,000 people in the U.S. civilian labor force.\108\
Consequently, the estimated ``new'' available workers in the first year
would represent approximately 0.001 percent of the overall U.S.
civilian labor force.\109\ DHS believes this fraction is too small to
have a significant impact on the labor market.
---------------------------------------------------------------------------
\108\ See News Release, United States Department of Labor,
Bureau of Labor Statistics, Local Area Unemployment Statistics,
Regional and State Unemployment--2015 Annual Averages, Table 1
``Employment status of the civilian non-institutional population 16
years of age and over by region, division, and state, 2014-15 annual
averages'' (Mar. 24, 2016), available at http://www.bls.gov/news.release/pdf/srgune.pdf.
\109\ Source: United States Department of Labor, Bureau of Labor
Statistics, Local Area Unemployment Statistic. Figure applies to
seasonally adjusted level for December 2014, available at: http://data.bls.gov/timeseries/LNS11000000. Calculation for new worker
labor force share: 1813/157,130,000.
---------------------------------------------------------------------------
While the figures above apply to the general U.S. labor force, DHS
recognizes that concentration of new labor force entrants can impact
specific labor markets. DHS believes that any such potential impacts
linked to this rule will be insignificant. The NVCA and other sources
of information that DHS reviewed indicates that while the area of
California known as Silicon Valley has traditionally been, and
continues to be, the primary recipient geographically for technology
startup capital, other large urban centers on the East Coast and, even
more recently, parts of the Mid- and Mountain West have seen increased
technology startup activity. To provide just one example of a potential
area-specific impact, DHS considered the San Jose-San Francisco-Oakland
(CA) Combined Statistical Area (CSA) conjoining the seven Metropolitan
Statistical Areas (MSAs) and nine encompassed counties constituting the
economic linkages of Silicon Valley. Based on data from the BLS, the
population of this CSA is about 8.6 million (as of May 2014) and the
employed population (a narrower measure of the labor market than the
labor force) about 3.75 million. If the share of new entrants is based
on the proportion of venture capital to the area, which is 42 percent,
then 2,746 spousal entrants could impact the area.\110\ Assuming such
entrants gain employment, this cohort represents just 0.02 percent of
the employed population of the specific CSA.
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\110\ The employment figures are provided by the BLS,
Occupational Employment Statistics (OES), found at: http://www.bls.gov/oes/current/oes_42100.htm. The population data is
provided by the Census Bureau, which tabulates CSAs: ``Combined
Statistical Area Totals Dataset: Population and Estimated Components
of Change: April 1, 2010 to July 1, 2014'' (CSV), 2014 Population
Estimates. United States Census Bureau, Population Division. March
2015. The information on the venture capital share for the region is
found in the NVCA 2015 yearbook, and is found in figure 8, p. 14.
The calculation is as follows: .(42 x 1813) = 761, which is then
divided by the CSA population of 3,750,000.
---------------------------------------------------------------------------
D. Government Costs
The INA provides for the collection of fees at a level that will
ensure recovery of the full costs of providing services, including
administrative costs and services provided without charge to certain
applicants and petitioners. See INA section 286(m), 8 U.S.C. 1356(m).
DHS has established the fee for the adjudication of proposed Form I-941
based on notional application filing volumes and estimated resource
commitments. During the biennial fee review, DHS will examine whether
the fee is sufficient to recover the full costs of adjudication, as
required by the INA.
5. Benefits
As referenced previously, evidence suggests that innovation-focused
start-ups contribute disproportionately to job creation. The proposed
rule would reduce entry barriers, and thus support efforts by foreign
entrepreneurs to generate entrepreneurial activity in the United
States.
The proposed rule is expected to generate important net benefits to
the United States economy. For one, expenditures on research and
development by the estimated annual grant-based researchers that DHS
has identified that could qualify for entrepreneur parole would
generate direct and indirect jobs. In addition, this research-focused
spending could potentially generate patents, intellectual property,
licensing, and other intangible assets that can be expected to
contribute to innovation and technological advances and spill over into
other sectors of the overall economy. DHS acknowledges that it is
extremely difficult to gauge the actual economic value of such assets
and that peer-reviewed research in this area is still nascent. Despite
the nascent stage of the research and the difficulty of measuring
quantitatively the benefit of innovation driven by new high technology
firms, various research indicates that the innovation driven by
entrepreneurs contributes directly to economic growth, generates
important efficiencies and cost reductions for firms that utilize such
innovation, and increases productivities and profitability for firms
that benefit indirectly through new products generated by such
innovation.
Lastly, DHS believes that a subset of the start-up firms formed by
foreign entrepreneurs during the proposed parole period could
eventually become high-growth firms that generate high levels of
profitability and contribute disproportionately to job creation in the
United States.
[[Page 60162]]
D. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as
amended by the Small Business Regulatory Enforcement Fairness Act of
1996, Public Law 104-121 (Mar. 29, 1996), requires Federal agencies to
consider the potential impact of regulations on small businesses, small
governmental jurisdictions, and small organizations during the
development of their rules. The term ``small entities'' comprises small
businesses, not-for-profit organizations that are independently owned
and operated and are not dominant in their fields, and governmental
jurisdictions with populations of fewer than 50,000. Individuals are
not defined as a ``small entity'' by the RFA.
DHS has reviewed this regulation in accordance with the Regulatory
Flexibility Act and certifies that this rule would not have a
significant economic impact on a substantial number of small entities.
This proposed rule would provide guidance on the use of parole for
entrepreneurs who seek it on a voluntary basis. The proposed rule would
not mandate that all individuals apply for parole. This proposed rule
provides flexibilities and options that do not currently exist for
individuals who wish to establish or operate a start-up business in the
United States. Importantly, the proposed rule does not require any
individuals or businesses, including those created by foreign
nationals, to seek parole--either generally or as a specific condition
for establishing or operating a business in the United States. Rather,
as mentioned previously, this proposed rule is intended to provide an
additional flexibility for foreign individuals who are unable to obtain
another appropriate nonimmigrant or immigrant classification, in order
to facilitate the applicant's ability to oversee and grow the start-up
entity. If any individual believes this rule imposes a significant
economic impact, that individual could simply choose to not avail
themselves to the requirements of the rule and would then incur no
economic impact. As discussed previously, this rule imposes direct
filing costs of $1,285 (which includes the $1,200 application fee and
the $85 biometrics fee), plus $194 in time-related opportunity costs
for those individuals who do choose to apply for entrepreneur parole.
This cost is relatively minor when considering the costs of starting up
a new business and the capital necessary to start a business.
Under the general term ``entrepreneur,'' DHS includes those who
desire to form firms with investment funds from certain U.S. investors.
For purposes of the RFA, the regulatory requirements place compliance
costs and establish eligibility criteria for the individual requesting
consideration for parole under this proposal. DHS believes that the
costs of application for parole would burden the individual applicant,
and not the entrepreneurial venture (firm). This proposed rule would
not alter or change the normal procedure for fundraising or other
start-up administrative costs that occur in forming a business entity.
Such costs are not direct costs of this rule and could include, but are
not limited to, business application fees, legal fees, and licensing
that precede significant infusions of investment, the latter of which
are primarily utilized for operational and capital expenses in order to
produce goods or services.
It is possible that some of the 2,940 estimated entrepreneurs who
could be eligible for parole annually could involve business structures
in which the filing fees are paid by a business entity. In the event
that small business entities are impacted by this proposed rule because
they choose to pay the filing fees on behalf of an individual
entrepreneur, DHS believes that the filing cost of $1,285 per
application would be insignificant compared to such entities' annual
gross revenues, potential for revenue, and other economic activity. DHS
welcomes public comment on the numbers of small business entities that
may be impacted by this rule, the likely compliance costs for these
entities, and any potential alternatives that may minimize these
compliance costs.
For businesses that may pay the filing costs, the expected impact
to such businesses would be small. For businesses that utilize either
the minimum threshold of $100,000 from a Federal grant or $345,000 in
capital investment to source the filing costs, such costs would
constitute 1.3 percent and 0.4 percent, respectively, of the total
capital amount. These relatively low cost proportions apply to those
firms that only obtain the minimum investment amounts. In addition, DHS
analyzed the cost impact relative to more typical RFA indices. DHS
analysis of Census Bureau data on the smallest firms found that the
average revenue based on sales receipts for firms with no paid
employees is $309,000, while the average for firms with one to four
paid employees is $411,000.\111\ The filing cost relative to these
averages is 0.42 percent and 0.31 percent, respectively.
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\111\ The data utilized for the analysis are found in the SBO
Table SB1200CSA09, ``Statistics for All U.S. Firms With Paid
Employees by Industry, Gender, and Employment Size of Firm for the
U.S. and States: 2012, 2012 Survey of Business Owners: http://census.gov/library/publications/2012/econ/2012-sbo.html. The file
location is: http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=SBO_2012_00CSA09&prodType=table. The
figures are rounded from $309,279 and $410,900, respectively.
---------------------------------------------------------------------------
DHS also analyzed the average revenue for new firms. Since the
proposed rule defines a new firm as one that is less than three years
old, DHS grouped private sector firms for the 2012 survey as those
responding that the year of establishment was either 2012, 2011, or
2010. DHS obtained the average revenue per firm and then weighted the
average by the yearly proportion of firms. Based on the resulting
weighted average of $162,000, such new firms would face a filing-cost
burden of 0.8 percent.\112\ DHS notes that there is a large difference
between the revenue of new firms with paid employees and those without
such employees (i.e., sole proprietors). For the latter, average
revenues are about $34,000, and the cost burden would be 3.8 percent.
However, because a central component of this parole program requires a
demonstration of significant public benefit in the form of economic
activity and job growth, DHS does not anticipate that sole proprietors
would be eligible to participate in this program.
---------------------------------------------------------------------------
\112\ The data utilized for the analysis are found in the SBO
Table SB1200CSCB11, ``Statistics for All U.S. Firms by Year the
Business Was Originally Established or Self-Employment Activity
Begun by Industry, Gender, Ethnicity, Race, and Veteran Status for
the U.S.: 2012: 2012 Survey of Business Owners: http://census.gov/library/publications/2012/econ/2012-sbo.html. The file location is:
http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=SBO_2012_00CSCB11&prodType=table. The average
revenue figure is rounded from $162,293.
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In summary, DHS believes that per-applicant costs would be
primarily incurred by the individual (which is not covered by the RFA),
any direct cost due to this rule would be relatively minor, and these
costs would only be borne by those who voluntarily choose to apply for
parole under this rule. While the applicant for parole may be the owner
of a firm that could be considered small within the definition of small
entities established by 5 U.S.C. 601(6), DHS considers the applicants
to be individuals at the point in time they are applying for parole,
particularly since it is the individual and not the entity that files
the application and it is the individual whose parole must serve a
significant public benefit under this proposed rule. Furthermore, even
if firms do voluntarily decide to incur the compliance costs on behalf
of the
[[Page 60163]]
individual requesting consideration for parole under the proposed
criteria, the only compliance costs those businesses would be permitted
to incur would be the filing costs for the applications. As indicated
previously, based on the comparison metric used, those costs are
expected to be insignificant.
Based on the evidence presented in this RFA section and throughout
this preamble, DHS certifies that this rule would not have a
significant economic impact on a substantial number of small entities.
E. Executive Order 13132
This rule will not have substantial direct effects on the States,
on the relationship between the National Government and the States, or
on the distribution of power and responsibilities among the various
levels of government. Therefore, in accordance with section 6 of
Executive Order 13132, it is determined that this rule does not have
sufficient federalism implications to warrant the preparation of a
federalism summary impact statement.
F. Executive Order 12988
This rule meets the applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988.
G. Paperwork Reduction Act
Under the Paperwork Reduction Act (PRA) of 1995, Public Law 104-13,
all Departments are required to submit to the Office of Management and
Budget (OMB), for review and approval, any reporting requirements
inherent in a rule. See Public Law 104-13, 109 Stat. 163 (May 22,
1995).
This proposed rule requires that an applicant requesting
entrepreneur parole complete an Application for Entrepreneur Parole,
Form I-941, and is considered a new information collection that is
covered under the PRA. To allow spouses and dependent children of the
entrepreneur to remain united as a family, DHS will need to revise the
Application for Travel Document, Form I-131, for these dependent family
members to request parole.
This proposed rule also requires a revision to Employment
Eligibility Verification, Form I-9, which has been previously approved
for use by OMB under the PRA. The OMB Control Number for this
information collection is 1615-0047. In accordance with new 8 CFR
274a.2(b)(1)(v)(A)(5) DHS is revising the Employment Eligibility
Verification, Form I-9, Lists of Acceptable Documents, List A item 5 to
replace ``nonimmigrant alien'' with ``individual,'' to replace
``alien's nonimmigrant'' with ``individual,'' and to add ``or parole''
after ``status'' in List A item 5.b.(2) allowing an endorsement by DHS
indicating such employment-authorized status or parole, 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.
Lastly, this proposed rule will require minor revisions to the
Application for Employment Authorization, Form I-765, to reflect
proposed changes that allow spouses of an entrepreneur parolee to
request employment authorization.
DHS has submitted these information collection requests to OMB for
review and approval under the PRA. Accordingly, DHS is requesting
comments on these impacted information collections. See the ADDRESSES
section above for instructions on how to submit comments to DHS and OMB
on the information collection provisions of this rulemaking. Written
comments and suggestions from the public and affected agencies
concerning the collection of information are encouraged. When
submitting comments on these information collections, your comments
should address one or more of the following four points:
(1) Evaluate whether the collection of information is necessary for
the proper performance of the agency, including whether the information
will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the collection of information, including the validity of the
methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the burden of the collection of the information on
those who are to respond, including through the use of any and all
appropriate automated, electronic, mechanical, or other technological
collection techniques or other forms of information technology (e.g.,
permitting electronic submission of responses).
Overview of Information Collection, Application for Entrepreneur
Parole, Form I-941
a. Type of information collection: New information collection.
b. Abstract: This collection will be used by individuals who file
an application for entrepreneur parole under INA section 212(d)(5)(A)
(8 U.S.C. 1182(d)(5)(A)) and proposed new 8 CFR 212.19. Such
individuals are subject to biometric collection in connection with the
filing of the application.
c. Title of Form/Collection: Application for Entrepreneur Parole,
Form I-941.
d. Agency form number, if any, and the applicable component of the
Department of Homeland Security sponsoring the collection: Form I-941,
U.S. Citizenship and Immigration Services.
e. Affected public who will be asked or required to respond:
Applicants requesting entrepreneur parole; Businesses and/or other non-
profit entities.
f. An estimate of the total annual numbers of respondents: 2,940.
g. Hours per response: The estimated hour per response for Form I-
941 is 1.33 hours. The estimated hour burden per response for the
biometric processing is 1.17 hours.
h. Total Annual Reporting Burden: The total estimated annual hour
burden associated with this collection is 3,910 hours for the Form I-
941 and 3,440 hours for the biometric processing, for a total of 7,350
hours.
Overview of Information Collection, Application for Travel Document
Form I-131, OMB Control No. 1615-0013
a. Type of information collection: Revised information collection.
b. Abstract: This collection will be used by dependents of
individuals who file an application for entrepreneur parole under INA
section 212(d)(5)(A) (8 U.S.C. 1182(d)(5)(A)) and proposed new 8 CFR
212.19. Such individuals are subject to biometric collection in
connection with the filing of the application.
c. Title of Form/Collection: Application for Travel Document Form
I-131.
d. Agency form number, if any, and the applicable component of the
Department of Homeland Security sponsoring the collection: Application
for Travel Document Form I-131, U.S. Citizenship and Immigration
Services.
e. Affected public who will be asked or required to respond:
Dependents of applicants requesting entrepreneur parole.
f. An estimate of the total annual numbers of respondents: 594,324;
3,234 additional respondents as a result of this rule.
g. Hours per response: The estimated hour per response for Form I-
131 Supplement is 1.90 hours. The estimated hour burden per response
for the biometric processing is 1.17 hours.
h. Total Annual Reporting Burden: 1,372,928; the total estimated
additional
[[Page 60164]]
annual hour burden associated with this collection is 143,942 hours.
Overview of Information Collection, Employment Eligibility
Verification, Form I-9, OMB Control No. 1615-0047
a. Type of information collection: Revised information collection.
b. Abstract: This form was developed to facilitate compliance with
section 274A of the Immigration and Nationality Act, which prohibits
the knowing employment of unauthorized aliens. This information
collection is necessary for employers, agricultural recruiters and
referrers for a fee, and state employment agencies to verify the
identity and employment authorization of individuals hired (or
recruited or referred for a fee, if applicable) for employment in the
United States.
c. Title of Form/Collection: Employment Eligibility Verification.
d. Agency form number, if any, and the applicable component of the
Department of Homeland Security sponsoring the collection: Form I-9,
U.S. Citizenship and Immigration Services.
e. Affected public who will be asked or required to respond:
Employers, employees, recruiters and referrers for a fee (limited to
agricultural associations, agricultural employers, or farm labor
contractors), and state employment agencies.
f. An estimate of the total annual numbers of respondents: 78
million employers and 78 million individuals (The total number of
responses will be only 78 million responses. Each response involves an
employer and an individual who is being hired).
g. Hours per response:
Time Burden for Employees--20 minutes (.33 hours) total;
Time Burden for Employers--10 minutes (.17 hours) total;
Time Burden for Recordkeeping--5 minutes (.08 hours)
total.
h. Total Annual Reporting Burden: Approximately 40,600,000 total
annual burden hours.
Overview of Information Collection, Application for Employment
Authorization, Form I-765, OMB Control No. 1615-0040
a. Type of information collection: Revised information collection.
b. Abstract: This collection will be used by individuals who file
an application for entrepreneur parole under INA section 212(d)(5)(A)
(8 U.S.C. 1182(d)(5)(A)) and proposed new 8 CFR 212.19. Such
individuals are subject to biometric collection in connection with the
filing of the application.
This form was developed for individual aliens to request employment
authorization and evidence of that employment authorization. The form
is being amended to add a new class of aliens eligible to apply for
employment authorization: a spouse of an entrepreneur parolee described
as eligible for employment authorization under this rule. Supporting
documentation demonstrating eligibility must be filed with the
application. The form lists examples of relevant documentation.
c. Title of Form/Collection: Application for Employment
Authorization, Form I-765.
d. Agency form number, if any, and the applicable component of the
Department of Homeland Security sponsoring the collection: Form I-765,
U.S. Citizenship and Immigration Services.
e. Affected public who will be asked or required to respond:
Spouses of applicants requesting entrepreneur parole.
f. An estimate of the total annual numbers of respondents:
1,984,456; 2,940 additional respondents (assuming a 1:1 ratio based on
the total estimate of principal applicants for entrepreneur parole).
g. Hours per response: The estimated hour per response for Form I-
765 is 3.42 hours. The estimated hour burden per response for the
biometric processing is 1.17 hours.
h. Total Annual Reporting Burden: 8,196,568; the total estimated
additional annual hour burden associated with this collection is 11,525
hours.
List of Subjects
8 CFR Part 103
Administrative practice and procedure, Authority delegations
(Government agencies), Freedom of information, Immigration, Privacy,
Reporting and recordkeeping requirements.
8 CFR Part 212
Administrative practice and procedure, Aliens, Immigration,
Passports and visas, Reporting and recordkeeping requirements.
8 CFR Part 274a
Administrative practice and procedure, Aliens, Employment,
Penalties, Reporting and recordkeeping requirements.
Accordingly, DHS is proposing to amend chapter I of title 8 of the
Code of Federal Regulations as follows:
PART 103--POWERS AND DUTIES; AVAILABILITY OF RECORDS
0
1. The authority citation for part 103 continues to read as follows:
Authority: 5 U.S.C. 301, 552, 552a; 8 U.S.C. 1101, 1103, 1304,
1356, 1365b; 31 U.S.C. 9701; Pub. L. 107-296, 116 Stat. 2135 (6
U.S.C. 1 et seq.); E.O. 12356, 47 FR 14874, 15557, 3 CFR, 1982
Comp., p.166; 8 CFR part 2.
0
2. Section 103.7 is amended by adding paragraph (b)(1)(i)(FFF) to read
as follows:
Sec. 103.7 Fees.
* * * * *
(b) * * *
(1) * * *
(i) * * *
(FFF) Application for Entrepreneur Parole (Form I-941). For filing
an application for parole for entrepreneurs: $1,200.
PART 212--DOCUMENTARY REQUIREMENTS: NONIMMIGRANTS; WAIVERS;
ADMISSION OF CERTAIN INADMISSIBLE ALIENS; PAROLE
0
3. The authority citation for part 212 is amended to read as follows:
Authority: 6 U.S.C. 111, 202(4) and 271; 8 U.S.C. 1101 and note,
1102, 1103, 1182 and note, 1184, 1185 note (section 7209 of Pub. L.
108-458), 1187, 1223, 1225, 1226, 1227, 1255, 1359; 8 CFR part 2.
Section 212.1(q) also issued under section 702, Public Law 110-
229, 122 Stat. 754, 854.
0
4. Add Sec. 212.19 to read as follows:
Sec. 212.19 Parole for entrepreneurs.
(a) Definitions. For purposes of this section, the following
definitions apply:
(1) Entrepreneur means an alien who possesses a substantial
ownership interest in a start-up entity and has a central and active
role in the operations of that entity, such that the alien is well-
positioned, due to his or her knowledge, skills, or experience, to
substantially assist the entity with the growth and success of its
business. For purposes of this section, an alien may be considered to
possess a substantial ownership interest if he or she possesses at
least a 15 percent ownership interest in the start-up entity at the
time of adjudication of the initial grant of parole and maintains at
least a 10 percent ownership interest in the start-up entity at all
times during the period of parole and any subsequent period of re-
parole.
(2) Start-up entity means a U.S. business entity that was recently
formed, has lawfully done business during any period of operation since
its date of formation, and has substantial potential for rapid growth
and job
[[Page 60165]]
creation. An entity that is the basis for a request for parole under
this section may be considered recently formed if it was created within
the 3 years immediately preceding the filing date of the alien's
initial parole request. For purposes of paragraphs (a)(3) and (a)(5) of
this section, an entity may be considered recently formed if it was
created within the 3 years immediately preceding the receipt of the
relevant grant(s), award(s), or investment(s).
(3) Qualified government award or grant means an award or grant for
economic development, research and development, or job creation (or
other similar monetary award typically given to start-up entities) made
by a federal, state, or local government entity that regularly provides
such awards or grants to start-up entities. This definition excludes
any contractual commitment for goods or services.
(4) Qualified investment means an investment made in good faith,
and that is not an attempt to circumvent any limitations imposed on
investments under this section, of lawfully derived capital in a start-
up entity that is a purchase from such entity of equity or convertible
debt issued by such entity. Such an investment shall not include an
investment, directly or indirectly, from the entrepreneur; the parents,
spouse, brother, sister, son, or daughter of such entrepreneur; or any
corporation, limited liability company, partnership, or other entity in
which such entrepreneur or the parents, spouse, brother, sister, son,
or daughter of such entrepreneur directly or indirectly has any
ownership interest.
(5) Qualified investor means an individual who is a U.S. citizen or
lawful permanent resident of the United States, or an organization that
is located in the United States and operates through a legal entity
organized under the laws of the United States or any state, that is
majority owned and controlled, directly and indirectly, by U.S.
citizens or lawful permanent residents of the United States, provided
such individual or organization regularly makes substantial investments
in start-up entities that subsequently exhibit substantial growth in
terms of revenue generation or job creation. The term ``qualified
investor'' shall not include an individual or organization that has
been permanently or temporarily enjoined from participating in the
offer or sale of a security or in the provision of services as an
investment adviser, broker, dealer, municipal securities dealer,
government securities broker, government securities dealer, bank,
transfer agent or credit rating agency, barred from association with
any entity involved in the offer or sale of securities or provision of
such services, or otherwise found to have participated in the offer or
sale of securities or provision of such services in violation of law.
For purposes of this section, such an individual or organization may be
considered a qualified investor if, during the preceding 5 years:
(i) The individual or organization made investments in start-up
entities in exchange for equity or convertible debt in at least 3
separate calendar years comprising a total in such 5-year period of no
less than $1,000,000; and
(ii) Subsequent to such investment by such individual or
organization, at least 2 such entities each created at least 5
qualified jobs or generated at least $500,000 in revenue with average
annualized revenue growth of at least 20 percent.
(6) Qualified job means full-time employment located in the United
States that has been filled for at least 1 year by one or more
qualifying employees.
(7) Qualifying employee means a U.S. citizen, a lawful permanent
resident, or other immigrant lawfully authorized to be employed in the
United States, who is not an entrepreneur of the relevant start-up
entity or the parent, spouse, brother, sister, son, or daughter of such
an entrepreneur. This definition shall not include independent
contractors.
(8) Full-time employment means paid employment in a position that
requires a minimum of 35 working hours per week. This definition does
not include combinations of part-time positions even if, when combined,
such positions meet the hourly requirement per week.
(9) U.S. business entity means any corporation, limited liability
company, partnership, or other entity that is organized under federal
law or the laws of any state, and that conducts business in the United
States, that is not an investment vehicle primarily engaged in the
offer, purchase, sale or trading of securities, futures contracts,
derivatives or similar instruments.
(10) Material change means any change in facts that could
reasonably affect the outcome of the determination whether the
entrepreneur provides, or continues to provide, a significant public
benefit to the United States. Such changes include, but are not limited
to, the following: Any criminal charge, conviction, plea of no contest,
or other judicial determination in a criminal case concerning the
entrepreneur or start-up entity; any complaint, settlement, judgment,
or other judicial or administrative determination concerning the
entrepreneur or start-up entity in a legal or administrative proceeding
brought by a government entity; any settlement, judgment, or other
legal determination concerning the entrepreneur or start-up entity in a
legal proceeding brought by a private individual or organization other
than proceedings primarily involving claims for damages not exceeding
10 percent of the current assets of the entrepreneur or start-up
entity; a sale or other disposition of all or substantially all of the
start-up entity's assets; the liquidation, dissolution or cessation of
operations of the start-up entity; the voluntary or involuntary filing
of a bankruptcy petition by or against the start-up entity; and any
significant change to the entrepreneur's role in or ownership and
control in the start-up entity or any other significant change with
respect to ownership and control of the start-up entity.
(b) Initial parole--(1) Filing of initial parole request form. An
alien seeking an initial grant of parole as an entrepreneur of a start-
up entity must file an Application for Entrepreneur Parole (Form I-941,
or successor form) with USCIS, with the required fees (including
biometric services fees), and supporting documentary evidence in
accordance with this section and the form instructions, demonstrating
eligibility as provided in paragraph (b)(2) of this section.
(2) Criteria for consideration. (i) In general. An alien may be
considered for parole under this section if the alien demonstrates that
a grant of parole will provide a significant public benefit to the
United States based on his or her role as an entrepreneur of a start-up
entity.
(ii) General criteria. An alien may meet the standard described in
paragraph (b)(2)(i) of this section by providing a detailed
description, along with supporting evidence:
(A) Demonstrating that the alien is an entrepreneur as defined in
paragraph (a)(1) of this section and that his or her entity is a start-
up entity as defined in paragraph (a)(2) of this section; and
(B) Establishing that the alien's entity has:
(1) Received, within 365 days immediately preceding the filing of
an application for initial parole, a qualified investment amount of at
least $345,000 from one or more qualified investors; or
(2) Received, within 365 days immediately preceding the filing of
an application for initial parole, an amount of at least $100,000
through one or more qualified government awards or grants.
(iii) Alternative criteria. An alien who satisfies the criteria in
paragraph (b)(2)(ii)(A) of this section and partially
[[Page 60166]]
meets one or both of the criteria in paragraph (b)(2)(ii)(B) of this
section may alternatively meet the standard described in paragraph
(b)(2)(i) of this section by providing other reliable and compelling
evidence of the start-up entity's substantial potential for rapid
growth and job creation.
(c) Additional periods of parole--(1) Filing of re-parole request
form. Prior to the expiration of the initial period of parole, an
entrepreneur parolee may request an additional period of parole based
on the same start-up entity that formed the basis for his or her
initial period of parole granted under this section. To request such
parole, an entrepreneur parolee must timely file the Application for
Entrepreneur Parole (Form I-941, or successor form) with USCIS, with
the required fees (including biometric services fees), and supporting
documentation in accordance with the form instructions, demonstrating
eligibility as provided in paragraph (c)(2) of this section.
(2) Criteria for consideration--(i) In general. An alien may be
considered for re-parole under this section if the alien demonstrates
that a grant of parole will continue to provide a significant public
benefit to the United States based on his or her role as an
entrepreneur of a start-up entity.
(ii) General criteria. An alien may meet the standard described in
paragraph (c)(2)(i) by providing a detailed description, along with
supporting evidence:
(A) Demonstrating that the alien continues to be an entrepreneur as
defined in paragraph (a)(1) of this section and that his or her entity
continues to be a start-up entity as defined in paragraph (a)(2) of
this section; and
(B) Establishing that the alien's entity has:
(1) Received at least $500,000 in qualifying investments, qualified
government grants or awards, or a combination of such funding, during
the initial parole period;
(2) Created at least 10 qualified jobs with the start-up entity
during the initial parole period; or
(3) Reached at least $500,000 in annual revenue and averaged 20
percent in annual revenue growth during the initial parole period.
(iii) Alternative criteria. An alien who satisfies the criteria in
paragraph (c)(2)(ii)(A) of this section and partially meets one or more
of the criteria in paragraph (c)(2)(ii)(B) may alternatively meet the
standard described in paragraph (c)(2)(i) of this section by providing
other reliable and compelling evidence of the start-up entity's
substantial potential for rapid growth and job creation.
(d) Discretionary authority; decision; appeals and motions to
reopen.
(1) Discretionary authority. DHS may grant parole under this
section in its sole discretion on a case-by-case basis if the
Department determines, based on the totality of the evidence, that an
applicant's presence in the United States will provide a significant
public benefit and that he or she otherwise merits a favorable exercise
of discretion. In determining whether an alien's presence in the United
States will provide a significant public benefit and whether the alien
warrants a favorable exercise of discretion, USCIS will consider and
weigh all evidence, including any derogatory evidence or information,
such as but not limited to, evidence of criminal activity or national
security concerns.
(2) Initial parole. DHS may grant an initial period of parole based
on the start-up entity listed in the request for parole for a period of
up to 2 years from the date the request is approved by USCIS. Approval
by USCIS of such a request must be obtained before the alien may appear
at a port of entry to be granted parole, in lieu of admission.
(3) Re-parole. DHS may re-parole an entrepreneur for one additional
period of up to 3 years from the date of the expiration of the initial
parole period. If the entrepreneur is in the United States at the time
that USCIS approves the request for re-parole, such approval shall be
considered a grant of re-parole. If the alien is outside the United
States at the time that USCIS approves the request for re-parole, the
alien must appear at a port of entry to be granted parole, in lieu of
admission.
(4) Appeals and motions to reopen. There is no appeal from a denial
of parole under this section. USCIS will not consider a motion to
reopen or reconsider a denial of parole under this section. On its own
motion, USCIS may reopen or reconsider a decision to deny the
Application for Entrepreneur Parole (Form I-941, or successor form), in
accordance with 8 CFR 103.5(a)(5).
(e) Payment of biometric services fee and collection of biometric
information. An alien seeking parole or re-parole under this section
will be required to pay the biometric services fee as prescribed by 8
CFR 103.7(b)(1)(i)(C). An alien seeking an initial grant of parole will
be required to submit biometric information. An alien seeking re-parole
may be required to submit biometric information.
(f) Limitations. No more than three entrepreneurs may be granted
parole under this section based on the same start-up entity. 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 entity, for a maximum period of parole of five years.
(g) Employment authorization. An entrepreneur who is paroled into
the United States pursuant to this section is authorized for employment
with the start-up entity incident to the conditions of his or her
parole.
(h) Spouse and children. (1) The entrepreneur's spouse and children
who are seeking parole as derivatives of such entrepreneur must
individually file an Application for Travel Document (Form I-131). Such
application must also include evidence that the derivative has a
qualifying relationship to the entrepreneur and otherwise merits a
grant of parole in the exercise of discretion. A biometric services fee
is required to be filed with the application. Such spouse or child will
be required to appear for collection of biometrics in accordance with
the form instructions or upon request.
(2) The spouse and children of an entrepreneur granted parole under
this section may be granted parole under this section for no longer
than the period of parole granted to such entrepreneur.
(3) The spouse of the entrepreneur parolee, after being paroled
into the United States, may be eligible for employment authorization on
the basis of parole under this section. To request employment
authorization, an eligible spouse paroled into the United States must
file an Application for Employment Authorization (Form I-765, or
successor form), in accordance with 8 CFR 274a.13 and form
instructions. An Application for Employment Authorization must be
accompanied by documentary evidence establishing eligibility, including
evidence of the spousal relationship.
(4) Notwithstanding 8 CFR 274a.12(c)(11), a child of the
entrepreneur parolee may not be authorized for and may not accept
employment on the basis of parole under this section.
(i) Conditions on parole. As a condition of parole under this
section, a parolee must maintain household income that is greater than
400 percent of the federal poverty line for his or her household size
as defined by the Department of Health and Human Services. USCIS may
impose other such reasonable conditions in its sole discretion with
respect to any alien approved for parole under this section, and it may
request verification of the
[[Page 60167]]
parolee's compliance with any such condition at any time. Violation of
any condition of parole may lead to termination of the parole in
accordance with paragraph (k) of this section or denial of re-parole.
(j) Reporting of material changes. An alien granted parole under
this section must immediately report any material change(s) to USCIS.
If the entrepreneur will continue to be employed by the start-up entity
and maintains at least a 10 percent ownership interest in the start-up
entity, the entrepreneur must submit a new Application for Entrepreneur
Parole (Form I-941, or successor form) with filing fee (not including
any biometrics fees) and supporting documentary evidence to notify
USCIS of the material change(s). The entrepreneur parolee must
immediately notify USCIS in writing if he or she will no longer be
employed by the start-up entity or ceases to possess at least a 10
percent ownership stake in the start-up entity.
(k) Termination of parole--(1) In general. DHS may, in its
discretion, terminate parole granted under this section at any time and
without prior notice or opportunity to respond if it determines that
the alien's continued parole in the United States no longer provides a
significant public benefit. Alternatively DHS may, in its discretion,
provide the alien notice and an opportunity to respond prior to
terminating the alien's parole under this section.
(2) Automatic termination. Parole granted under this section will
be automatically terminated without notice at the expiration of the
time for which parole was authorized, unless the alien timely files a
non-frivolous application for re-parole. Parole granted under this
section may be automatically terminated when USCIS receives written
notice from the entrepreneur parolee that he or she will no longer be
employed by the start-up entity or ceases to possess at least a 10
percent ownership stake in the start-up entity in accordance with
paragraph (j) of this section. Additionally, parole of the spouse or
child of the entrepreneur will be automatically terminated without
notice if the parole of the entrepreneur has been terminated. If parole
is terminated, any employment authorization based on that parole is
automatically revoked.
(3) Termination on notice. USCIS may terminate on notice or provide
the entrepreneur or his or her spouse or children, as applicable,
written notice of its intent to terminate parole if USCIS believes
that:
(i) The facts or information contained in the request for parole
were not true and accurate;
(ii) The alien failed to timely file or otherwise comply with the
material change reporting requirements in this section;
(iii) The entrepreneur parolee is no longer employed in a central
and active role by the start-up entity or ceases to possess at least a
10 percent ownership stake in the start-up entity;
(iv) The alien otherwise violated the terms and conditions of
parole; or
(v) Parole was erroneously granted.
(4) Notice and decision. A notice of intent to terminate issued
under this paragraph should generally identify the grounds for
termination of the parole and provide a period of up to 30 days for the
alien's written rebuttal. The alien may submit additional evidence in
support of his or her rebuttal, when applicable, and USCIS will
consider all relevant evidence presented in deciding whether to
terminate the alien's parole. Failure to timely respond to a notice of
intent to terminate will result in termination of the parole. When a
charging document is served on the alien, the charging document will
constitute written notice of termination of parole (if parole has not
already been terminated), unless otherwise specified. Any further
immigration and removal actions will be conducted in accordance with
the Act and this chapter. The decision to terminate parole may not be
appealed. USCIS will not consider a motion to reopen or reconsider a
decision to terminate parole under this section. On its own motion,
USCIS may reopen or reconsider a decision to terminate.
(l) Increase of investment and revenue amount requirements. The
investment and revenue amounts in this section will be automatically
adjusted every 3 years by the Consumer Price Index and posted on the
USCIS Web site at www.uscis.gov. Investment and revenue amounts
adjusted under this paragraph will apply to all applications filed on
or after the beginning of the fiscal year for which the adjustment is
made.
PART 274a--CONTROL OF EMPLOYMENT OF ALIENS
0
5. The authority citation for part 274a continues to read as follows:
Authority: 8 U.S.C. 1101, 1103, 1324a; 48 U.S.C. 1806; 8 CFR
part 2.
0
6 Section 274a.2 is amended by:
0
(a) Revising paragraphs (b)(1)(v)(A)(5) and (b)(1)(v)(C)(2);
0
(b) Removing paragraph (b)(1)(v)(C)(3); and
0
(c) Redesignating paragraphs (b)(1)(v)(C)(4) through (8) as paragraphs
(b)(1)(v)(C)(3) through (7).
The revision reads as follows:
Sec. 274a.2 Verification of identity and employment authorization.
* * * * *
(b) * * *
(1) * * *
(v) * * *
(A) * * *
(5) In the case of an individual who is employment-authorized
incident to status or parole with a specific employer, a foreign
passport with an Arrival/Departure Record, Form I-94 (as defined in 8
CFR 1.4) or Form I-94A, bearing the same name as the passport and
containing an endorsement by DHS indicating such employment-authorized
status or parole, 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.
* * * * *
(C) * * *
(2) Certification or report of birth issued by the Department of
State, including Forms FS-545, DS-1350, FS-240, or successor forms;
* * * * *
0
7. Section 274a.12 is amended by:
0
a. Revising paragraph (b) introductory text,
0
b. Adding and reserving new paragraphs (b)(25) through (36);
0
c. Adding a new paragraph (b)(37);
0
d. Revising paragraph (c)(11);
0
e. Adding and reserving new paragraphs (c)(27) through (33);
0
f. Adding a new paragraph (c)(34).
The revisions and additions read as follows:
Sec. 274a.12 Classes of aliens authorized to accept employment.
* * * * *
(b) Aliens authorized for employment with a specific employer
incident to status or parole. The following classes of aliens are
authorized to be employed in the United States by the specific employer
and subject to any restrictions described in the section(s) of this
chapter indicated as a condition of their parole, or admission in, or
subsequent change to, such classification. An alien in one of these
classes is not issued an employment authorization document by DHS:
* * * * *
(25)-(36) [Reserved] (37) An alien paroled into the United States
as an entrepreneur pursuant to 8 CFR 212.19 for the period of
authorized parole. An entrepreneur who has timely filed a non-frivolous
application requesting re-
[[Page 60168]]
parole with respect to the same start-up entity in accordance with 8
CFR 212.19 prior to the expiration of his or her parole, but whose
authorized parole period expires during the pendency of such
application, is authorized to continue employment with the same start-
up entity for a period not to exceed 240 days beginning on the date of
expiration of parole. Such authorization shall be subject to any
conditions and limitations on such expired parole. If DHS adjudicates
the application prior to the expiration of this 240-day period and
denies the application for re-parole, the employment authorization
under this paragraph shall automatically terminate upon notification to
the alien of the denial decision.
* * * * *
(c) * * *
(11) Except as provided in Sec. 274a.12(b)(37) and (c)(34) and
Sec. 212.19(h)(4) of this chapter, an alien paroled into the United
States temporarily for urgent humanitarian reasons or significant
public benefit pursuant to section 212(d)(5) of the Act.
* * * * *
(27)-(33) [Reserved]
(34) A spouse of an entrepreneur parolee described as eligible for
employment authorization in Sec. 212.19(h)(3) of this chapter.
* * * * *
Jeh Charles Johnson,
Secretary of Homeland Security.
[FR Doc. 2016-20663 Filed 8-26-16; 1:00 pm]
BILLING CODE 9111-97-P