By Reaz H. Jafri
(Reaz H. Jafri is Of Counsel to Withers Bergman LLP in New York City. He has more than 20 years of experience advising large, multi-facility healthcare providers, research foundations, American businesses, multi-national companies, foreign investors and high-net worth individuals on all aspects of immigration law and regulatory compliance. He concentrates on business, investment and employment-based cases and has successfully assisted clients in obtaining nonimmigrant or temporary visas.)
In 1883, the NYC poet Emma Lazarus penned the now-mythical words “Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!” These words promised liberty and opportunity to waves upon waves of immigrants, who made their mark in United States. While the unchecked embrace of that noble proclamation on the Statute of Liberty may no longer rule the day, the Obama Administration’s recent “Entrepreneurs in Residence” (EIR) initiative adds “foreign entrepreneurs” to poor Emma’s list of wretched refuse.
Often criticized for his hostile stance against business, on Jan. 31, 2011, President Obama stated, "Entrepreneurs embody the promise of America: the idea that if you have a good idea and are willing to work hard and see it through, you can succeed in this country. And in fulfilling this promise, entrepreneurs also play a critical role in expanding our economy and creating jobs.”
Exactly one year later, the Department of Homeland Security introduced immigration into the dialogue and stated, “The President is deeply committed to fixing our broken immigration system so that it meets our 21st century national security and economic needs. As a part of comprehensive immigration reform, the President supports legislative measures that would attract and retain immigrants who create jobs and boost competitiveness here in the U.S., including creating a "Startup Visa," strengthening the H-1B program, and "stapling" green cards to the diplomas of certain foreign-born graduates in science, technology, engineering, and math (STEM) fields.”
In fact, in his 2012 State of the Union address and in support of this initiative, the President pointed out that 25 percent of America’s high-tech start-up jobs were founded by immigrants. The ‘highly skilled immigrants create jobs, they don’t take jobs’ argument made by entrepreneurs, business immigration lawyers and the larger business community for more than 2 decades had seemingly fell on deaf ears. By launching the EIR initiative, it is clear the Administration was listening and, by its action, appears committed to create a pathway for immigrant entrepreneurs to pursue their ambitions in America.
WHAT IS THE ENTREPRENEUR IN RESIDENCE INITIATIVE?
EIR is an attempt by the United States Citizenship & Immigration Services (USCIS) to harness the expertise from public and private sectors to increase the job-creation potential of employment-based and highly-skilled visa categories. It is important to note that USCIS is not creating new visas for entrepreneurs. USCIS is simply expanding the scope and reach of existing visa categories to attract entrepreneurial talent.
According to the 2010 census, approximately 40 percent of all jobs in America are with employers that have less than 20 employees. These small employers are the start-ups, the on-line-collaborating, coffee-shop-meeting dreamers that want to start their own business. Until recently, work visas and green cards were not available to these entrepreneurs — except for the investor-based green card (EB5), which requires a person to risk $1 million ($500,000 in high unemployment areas). Of course, the typical entrepreneur graduating does not have a million dollars, and if he or she does, likely does not want to risk all of it in an investment! No, what these individuals have is the most romantic of American ideals: to develop an idea, take it to market and strike it rich!
WHO IS AN ENTREPRENEUR?
In its public comments, USCIS seems to envision that the “entrepreneur” is someone who has graduated from an American university — usually in a STEM field — or has a similar background from his or her home country and who wants to start a new business in the U.S. This is deduced from the fact that nearly all temporary work visas require a person to possess an advanced level of expertise and/or education in science, math, business, arts or education.
Therefore it is fair to conclude that the typical immigrant entrepreneur is someone who has recently graduated from a U.S. or foreign university, or is working in the U.S. or abroad and is eager to launch a start up.
There will be others, of course, including successful foreign business owners, children of wealthy families as well as wealthy families themselves who want to avail themselves of the EIR opportunity without significant financial investment.
WHAT VISAS ARE AVAILABLE?
As EIR is entirely new and USCIS officers are still being trained to better understand and speak the language of entrepreneurs, it is critical to understand the difference between various temporary or nonimmigrant visa (NIV) and permanent or immigrant visa (IV or green card) categories; the requirements for each; and how EIR promises to ease the eligibility of entrepreneurs to procure these NIVs and IVs.
The most frequently used NIVs, and those applicable in the EIR context, are Treaty Trader (E-1), Treaty Investor (E-2), Specialty Occupation Worker (H-1B), Intracompany Transferee (L-1) and person with Extraordinary Ability in science, art, education, business or athletics (O-1).
The E-1 and E-2 visa require the existence of a treaty of commerce and navigation between the U.S. and the entrepreneur’s country of nationality. Both also require evidence that the entrepreneur is coming to the U.S. to carry on substantial trade — including trade in services or technology — principally between the U.S. and the treaty country, or to develop and direct U.S. operations of an enterprise in which the entrepreneur has invested, or is in the process of investing a substantial amount of capital. Historically and by regulation, an E-visa required “substantial” trade or investment that was more than “marginal”. With EIR, however, the idea is that a foreign entrepreneur should be able to procure an E-1 visa is the trade is less than “substantial” or an E-2 visa if the investment is “marginal” — how this plays out with case adjudicators remains to be seen.
An H-1B visa is for a personengaged in a “specialty occupation”, defined as an occupation that requires “the theoretical and practical application of a body of highly specialized knowledge requiring completion of a specific course of higher education.” Although a favorite of IT professionals, the H-1B is available to any of the professions (medicine, law, accounting, architecture, engineering), as well as any occupation for which the minimum educational requirement is a baccalaureate.
The H-1B program is jointly administered by the U.S. Department of Labor and USCIS, with DOL’s role being to make sure U.S. employers comply with prevailing wage requirements and follow practices that do not prejudice U.S. workers. In the case of the EIR-driven H-1B, this will clearly have to be re-thought for the simple reason that the entrepreneur is unlikely to comply with DOL wage requirements and will initially favor himself or herself over a U.S. worker.
Managers and executives of a foreign company, and those possessing specialized knowledge about a foreign company’s products, services, etc. or its application in international markets, are eligible for L-1A and L-1B visas, respectively. A basic requirement for an L-1 visa is the existence of a foreign company and a U.S. subsidiary, branch or affiliate and that prospective transferee have worked for the foreign company for at least one of the preceding three years.
Until now, a successful L-1 petition had to demonstrate that the foreign company is a viable business concern and that it would remain so after the transfer of the manager, executive or specialized knowledge employee. With EIR, one hopes that USCIS will more liberally construe what is a viable business concern for the foreign entrepreneur/owner of an overseas start-up with few employees who wishes to establish a U.S. office (perhaps at the urging of investors) to further develop, test and/or market its products or services, and not be restricted by its previous and more traditional analyses of financial statements, business records, market share, etc.
The O-1 is perhaps the most interesting of the NIVs because it has no DOL involvement, does not require a foreign office and does not require the transaction of trade and/or business in the U.S. The O-1 is for individuals who possess extraordinary ability in the sciences, arts, education, business, or athletics (O-1A), or who have a record of extraordinary achievement in the motion picture or television industry and have been recognized nationally or internationally for those achievements (O-1B).
Individuals who accompany an O-1 artist or athlete, to assist in a specific event or performance are eligible for an O-2 if the assistance is an “integral part” of the O-1A’s activity. For an O-1B, the O-2’s assistance must be “essential” to the completion of the O-1B’s work. Although USCIS rules state that O-2 workers must have critical skills and experience that cannot be readily performed by a U.S. worker, one should expect that EIR initiative would liberalize this requirement.
With regards to green cards or IVs, there are several paths one can take. The most frequently utilized path entails a U.S. employer sponsoring a foreign worker for a job that it needs filled. This process, called Application for Permanent Employment Certification, initially requires an employer to test the job market and demonstrate it could not find qualified U.S. workers — the underlying principle being we don't want to take jobs away from American workers.
If the U.S. employer is unable to find a U.S. worker that meets the job requirements, DOL certifies the application, allowing the employer to file a petition with USCIS to then classify the foreign worker as an “immigrant.” If an IV is available in the employment category for the country of the foreigner’s place of birth, then contemporaneously with the immigrant petition, the employee can file to adjust his or status and obtain a green card. It is uncertain how EIR will work in this context — if it will work at all — because it is illogical and unrealistic to expect a foreign entrepreneur to test the U.S. job market for his or her replacement.
Alternatively, an employer can sponsor a foreigner and avoid the labor certification by demonstrating that the employee’s presence in the U.S. is in America’s “national interest.” Known as a National Interest Waiver, this type of case requires showing that:
(i) the activity in which the employee is engaged has “intrinsic merit;”
(ii) the prospective benefit from this activity is “national in scope;” and
(iii) the employee’s past achievements and contributions are such that the benefit to the employer and the country from having this employee get a green card are greater than the general interest the U.S. has in requiring employers to test the job market.
A tremendous and critical difference between an Application for Permanent Employment Certification and NIW is that an NIW can be filed by a U.S. employer or an individual. With EIR, an entrepreneur who starts a business and hires U.S. workers is benefiting the U.S. economy and should be able to qualify for a green card.
Other paths to a green card for an entrepreneur — as opposed to an investor — include an entrepreneur filing a self-petition on the basis that he or she possesses extraordinary ability. To establish “extraordinary ability” an entrepreneur must provide evidence of receipt of an internationally recognized award such as a Nobel prize or at least 3 of the following:
• Receipt of lesser nationally or internationally recognized prizes or awards;
• Membership in associations in a field which demand outstanding achievement of their members;
• Published material in major publications or other media.
• Acting as a judge of the work of others.
• Original scientific, scholarly, artistic, athletic, or business-related contributions of major significance.
• Authorship of scholarly articles in major publications or other media.
• Display of work at artistic exhibitions or showcases.
• Performance of a leading or critical role in distinguished organizations.
• Commanding a high salary in relation to others in the field.
• Commercial successes in the performing arts.
The “extraordinary ability” path may be the most accessible — especially in light of EIR- for the entrepreneur who is engaged in a field where patents, publications, performances and other distinguishing achievements are commonplace. While there are other paths to a green card, the above 3, at least to this author, are the most applicable.
HOW EIR WILL CHANGE THE LANDSCAPE
To say USCIS has been hostile to visa petitions filed by entrepreneurs, small businesses and start-ups is an understatement. Although existing laws allow foreigners to set up their own companies and “self-sponsor,” USCIS, through a long lines of cases, memoranda and policy statements, has effectively closed those doors.
With its public commitment to “attract the best and brightest from around the world to grow the U.S. economy and create American jobs,” USCIS promises to streamline the process for foreign entrepreneurs to obtain visas and green cards. As evidence of that commitment, USCIS Director Alejandro Mayorkas confirmed on a Dec. 12 conference call that 300 immigration officers are being trained on EIR to “better speak the language of entrepreneurs.”
BEWARE OF OLD PREJUDICES AND THE TAXMAN
Understandably, EIR has created a lot of buzz and excitement in the immigrant community as well as the immigration bar. To the hundreds of thousands of bright young foreign students currently enrolled at America’s leading universities, the possibility of having visas that will let them remain in America to pursue their dreams is itself a dream realized.
Naturally, there is suspicion as to whether or how USCIS will look at the applications filed by entrepreneurs. Over the past many years, there has been a sense — whether real or imagined — that U.S. employers and immigrants were in some sinister collusion to subvert immigration laws. This resulted in companies setting up shop overseas and countless persons taking their talent, often learned at American universities and think tanks, overseas.
It is hoped that USCIS is true to its publicly stated mission of attracting and keeping the best and brightest — future founders of breakthrough companies and captains of industry — in America.
A frequently overlooked consequence of obtaining a nonimmigrant visa or green card is the matter of taxes. A person who is present in the U.S. with a green card or for more than a specified period of days annually with an employment-based NIV is subject to taxation on his or her worldwide income.
While this worldwide taxation terminates once a NIV-holder departs the U.S., a significant “exit tax” — presently 30 percent — must be paid by a green card holder who wishes to surrender a green card and permanently depart the U.S. Therefore, an entrepreneur who has private equity, venture capital or other financial backing, has substantial overseas assets or income, or hails from a wealthy family should proceed cautiously — and first speak to a tax or wealth planning attorney. Otherwise, he may unwittingly become a “Taxpayer in Residence” and be added to Emma’s list of the wretched.