- Background of the Memorandum
On August 9, 2017, the United States Citizenship and Immigration Services issued a Policy Memorandum titled “Definition of 'Affiliate' or “Subsidiary' for Purposes of Determining the H-1B ACWIA Fee” (“ACWIA fee memo”) [see PM-602-0147].
Under section 214(c)(9)(B) of the Immigration and Nationality Act (INA), the fee for most H1B petitions is $1,500. However, the fee is only half of that for small employers with not more than 25 full-time equivalent employees, including any affiliates or subsidiaries of the employer. The terms “affiliate” and “subsidiary” are not defined in the INA. Accordingly, the USCIS issued the ACWIA fee memo to provide agency guidance on the proper definitions of “affiliate” and “subsidiary” under section 214(c)(9)(B) for purpose of determining the appropriate H1B ACWIA fee. Ultimately, the USCIS decided to adopt existing definitions of the terms from regulations regarding L1 visa petitions.
In this article, we will examine the guidance in the ACWIA fee memo on determining the appropriate H1B ACWIA fee. Please see our full selection of H1B articles to learn about a wide range of H1B-related issues [see category].
In 1998, Congress enacted the American Competitiveness and Workforce Improvement Act of 1998 (ACWIA), Public Law 105-277, div. C, tit. IV, 112 Stat. 2681. ACWIA created a fee for each H1B worker sponsored as part of an H1B petition. It is worth noting that, under section 214(c)(9)(A) of the INA, the following employers are exempted entirely from the ACWIA fee:
- Primary education institution;
- Secondary education institution;
- Institution of higher education as defined in 20 U.S.C. 1101(a) [see article];
- Non-profit entity related to or affiliated with an institution of higher education as defined in 20 U.S.C. 1101(a);
- Non-profit entity which engages in established curriculum-related clinical training of students registered at any such institution;
- Non-profit research organization; and
- Governmental research organization.
Under current law, the H1B ACWIA fee is $1,500 per qualifying petition for employers with 26 or more full-time equivalent U.S. employees. The fee is $750 for employers with 25 or fewer full-time equivalent employees employed in the United States, including employees employed by any affiliate or subsidiary of the employer. For purpose of determining which fee applies, the USCIS does not count employees working for affiliates and subsidiaries abroad.
The definition of “full-time equivalence” has been developed through the regulations of the U.S. Department of Labor (DOL).
First, a “full-time employee” is generally defined as an employee who works at least 40 hours per week. In limited circumstances, an employee working more than 35 hours per week but fewer than 40 hours per week may qualify as a full-time employee (if the employer shows that this is full-time employment in its regular course of business). These regulations are found in 20 C.F.R. 655.736(a)(2)(iii)(A).
Under 20 C.F.R. 655.736(a)(2), the DOL calculates “full-time equivalents,” which is distinguishable from full-time employees, by adding the number of full-time employees (as defined in 20 C.F.R. 655.736(a)(2)(iii)(A)) and the number of part-time employees aggregated to full-time equivalents.
However, while the term “full-time equivalents” is defined in DOL regulations, the terms “affiliate” and “subsidiary” are not defined in section 214(c)(9)(B) of the INA. Accordingly, the ACWIA fee memo set out to provide working definitions of these terms for USCIS adjudicators.
The ACWIA fee memo notes that, while section 214(c)(9)(B) does not define the term, “affiliate” is defined in a different context in the Department of Homeland Security (DHS) regulations for L1 intracompany transferees. 8 C.F.R. 214.2(l)(1)(ii)(L)(1) and (2) define “affiliate” in the L1 context as follows (portions of regulation excerpted by the USCIS in the ACWIA fee memo):
- One of two subsidiaries both of which are owned and controlled by the same parent or individual, or
- One of two legal entities owned and controlled by the same group of individuals, each individual owning and controlling approximately the same share or proportion of each entity…”
The USCIS opted to adopt 8 C.F.R. 214.2(l)(1)(ii)(L)(1) and (2) as its definition for “affiliate” in the H1B ACWIA fee context (note that it found 8 C.F.R. 214.2(l)(1)(ii)(L)(3) to be inapplicable). It noted that under Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 184-85 (1988) [PDF version], Congress is presumed to be aware of USCIS regulations at the time it passes a law (the L1 regulations preexist the H1B ACWIA fee statute). The ACWIA fee memo also notes that adopting the existing definition of “affiliate” in the L1 context “provides for improved consistency and easy of application by officers and stakeholders.”
The ACWIA fee memo instructs USCIS officers to count employees of affiliates as defined under 8 C.F.R. 214.2(l)(1)(ii)(L)(1) and (2) in determining the number of full-time equivalent employees of a petitioner for purpose of calculating the ACWIA fee. It notes that under the definition adopted the parent company of the petitioning employer should not be counted as an affiliate.
The USCIS adopted a similar approach for developing a definition of “subsidiary” in the H1B context, again appealing to an existing definition of the term in the L1 context. Under 8 C.F.R. 214.2(l)(1)(ii)(K), a subsidiary is “a firm, corporation, or other legal entity of which a parent owns, directly or indirectly, more than half of the entity and controls the entity; or owns, directly or indirectly, half of the entity and controls the entity; or owns directly or indirectly, 50 percent of a 50-50 joint venture and has equal control and veto power over the entity; or owns directly or indirectly, less than half of the entity, but in fact controls the entity.” The USCIS found this definition applicable in the ACWIA fee context and determined that applying the already existing L1 definition in the H1B context “provides for improved consistency and ease of application by officers and stakeholders.”
Accordingly, the ACWIA fee memo directs USCIS adjudicators to apply 8 C.F.R. 214.2(l)(1)(ii)(K) when determining the proper full-time equivalent employee count for the ACWIA fee. In applying 8 C.F.R. 214.2(l)(1)(ii)(K), USCIS officers must count the petitioning employer's own full-time equivalent employees and the full-time equivalent employees of its subsidiaries and subsidiaries of subsidiaries and affiliates.
In applying the L1 definitions of “affiliate” and “subsidiary,” the ACWIA fee memo instructs USCIS officers to “count down and horizontally,” meaning they should look at the petitioning employer's affiliates and subsidiaries. However, USCIS officers should not “count up,” meaning toward its parents or its affiliate(s) parents, if applicable.
In determining whether a petitioning employer has affiliates or subsidiaries that must be considered in the ACWIA fee context, USCIS officers must review all available evidence submitted by the petitioner. This evidence may include, but is not limited to, items from the following list (paraphrased):
- Information provided in the petition;
- Information provided in previous petitions (if applicable);
- Statement from the petitioner attesting to the total number of full-time equivalent employees employed in the United States by it and its affiliates and subsidiaries;
- The most recent Securities and Exchange Commission (SEC) Form 10-K filed by the U.S. entity, which lists all of its affiliates and subsidiaries;
- Copies of bylaws or other corporate documents that list U.S. and foreign affiliates and subsidiaries;
- The most recent filings by a foreign affiliate or subsidiary of the petitioner filed with a foreign government agency, including any annual reports or documents which list any U.S. affiliates or subsidiaries;
- Copies of quarterly corporate tax returns;
- Payroll records covering the period of time when the petition was filed;
- Employee lists with position titles and employment start dates;
- Public records;
- IRS annual tax returns (including attachments and schedules); and
- Any other corporate documents that list all of the petitioner's U.S. and foreign affiliates and subsidiaries.
The USCIS's decision to adopt the L1 regulatory definitions of “affiliate” and “subsidiary” in the H1B context will provide certainty in that the L1 definitions have been applied over a long period of time to L1 petitions. When petitioning for H1B workers, an employer should always consult with an experienced immigration attorney in the field of employment immigration. Such an attorney will be able to determine if the petitioner is eligible for the reduced ACWIA fee and the necessary evidence to establish eligibility if it is.