Public Comment on The Department of Homeland Security’s Proposed International Entrepreneur Rule

USCIS
by Daniel R. Pérez, Policy Analyst
October 18, 2016

Download the public comment (PDF)

The George Washington University Regulatory Studies Center improves regulatory policy through research, education, and outreach. As part of its mission, the Center conducts careful and independent analyses to assess rulemaking proposals from the perspective of the public interest. This comment on the Department of Homeland Security’s (DHS) proposed rule broadening its use of discretionary parole authority to facilitate foreign entrepreneurs to oversee and grow a U.S. startup entity does not represent the views of any particular affected party or special interest, but is designed to evaluate the effect of DHS’s proposal on overall societal welfare.

Introduction

The Department of Homeland Security’s proposed rule would expand the use of its discretionary authority to parole individuals into the United States for reasons of “significant public benefit” to include foreign entrepreneurs looking to start a business in the U.S. DHS recognizes that “the full potential of foreign entrepreneurs to benefit the U.S. economy is presently limited since many…do not qualify under existing nonimmigrant and immigrant classifications.” The rule proposes several criteria for approving applicants on a case-by-case basis.

A decision by U.S. Citizenship and Immigration Services (USCIS) to approve an applicant would grant an initial parole providing a stay of up to 2 years; DHS also proposes separate criteria specifying conditions under which USCIS could approve a parole extension (re-parole) of up to an additional 3 years. This rule is designed to “facilitate the applicant’s ability to oversee and grow his or her start-up entity in the United States.” Additionally, parole can be approved for up to 3 entrepreneurs associated with the same business. Parole would also confer benefits to qualifying members of an entrepreneur’s immediate family.

The criteria proposed by DHS are designed to limit the use of parole to applicants whose business “would provide a significant public benefit through the substantial and demonstrated potential for rapid business growth and job creation.” In particular, DHS looks to target a subset of businesses known as “high-growth firms.” Experts disagree regarding what constitutes a high-growth firm, but these are generally firms that are responsible for a disproportionality large share of economic gains related to growth in: total factor productivity, job creation, innovation, and GDP.[3]

DHS’s proposed rule is a welcome step in reducing barriers to foreign entrepreneurship in the U.S. However, the criteria proposed for approving parole need to strike a balance between restricting the use of parole to high-growth firms without creating unnecessarily stringent restrictions that result in excluding a large number of firms that would otherwise create a significant public benefit. This comment proposes several changes that DHS could make to its proposed rule to maximize its potential benefits. These include:

  • Reducing the amount of investment required for an applicant to qualify for initial parole. DHS based its threshold of $345,000 on the mean amount of combined capital investment “typically obtained in early rounds of investment from venture capital firms or angel investors” in the U.S. However, this amount is likely too restrictive (i.e., the datasets used by DHS include firms in New York likely to require significantly more capital than firms in Houston).[4]
  • Expanding qualified sources of investment capital to include foreign investors and crowdfunding. It seems reasonable to extend DHS’s definition of a “qualified investor” to foreign investors. Including capital raised via crowdfunding for consideration of parole is in line with the policy priorities of the Jumpstart our Business Startups Act (JOBS Act) to encourage funding of U.S. small businesses.
  • Considering taxes paid as an additional criterion for re-parole. DHS asked the public to provide additional criteria it might consider in evaluating parole applications. Although DHS would have to decide on both a threshold and the type of tax to consider (e.g., the start-up’s or the entrepreneur’s, Federal or state, etc.), this might provide an additional and easily verifiable criterion for USCIS adjudicators to consider.
  • Planning for retrospective review. DHS should add a section within the proposed rule that indicates how it will analyze the program’s effects once implemented. This will allow the agency to better plan for retrospective evaluation of the program’s effects as directed by Executive Order 13563.[5]

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[3]    See Clayton et al. “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. For the relationship between high-growth firms and the economy, see: Haltiwanger et al. “Who Creates Jobs? Small vs. Large vs. Young,” the National Bureau of Economic Research. NBER Working Paper No. 16300. August 2010. Available at: http://www.nber.org/papers/w16300

[4]    Examples of significant differences in aggregate valuations for all industries solely based on location within the U.S. can be found here: https://angel.co/valuations

[5]    Exec. Order No. 13563, Improving Regulation and Regulatory Review