I-140 filing is the second step of a permanent residency application. For approval of the I-140 petition one must prove that the beneficiary qualifies for the offered position. In addition, Petitioner also must prove that the I-140 petitioner has ability to pay beneficiary the salary offered in the PERM labor certification application. Every now and then one comes across a Request for Evidence (RFE) on ability to pay in the context of the I-140 filing.
Basic guidelines on the ability to pay issue was outlined in the Interoffice Memorandum dated May 4, 2004, by Mr. William Yates, Associate Director for Operations of USCIS. If you go through the memorandum, you will find that it will talk about the initial evidence to be submitted like Tax Returns or Audited Financial Statements or Annual Reports. Then the memo will go on to say that positive determination to be made if the Petitioner’s net income is more than the offered salary or the net current assets is more than the offered salary, or the beneficiary is currently employed with the beneficiary and was paid or currently being paid the offered salary. But the memo does not address some issues like if the ability to pay must be established for all the beneficiaries for whom the petitioner has filed the I-140 petition or if the ability to pay must be proven for each of the year since the filing date of the PERM application (known as priority date). I will try my best to breakdown to complex I-140 ability to pay issue in simple terms. Typically, I-140 ability to pay issue involve some basic analysis and data scrubbing.
Take for example, offered salary in I-140 petition filed in the year 2023 is $ 100k and the PERM application was filed in the year 2021. In this scenario, if Petitioner can prove that the beneficiary made a salary of $ 100k in the years 2021 and 2022 and earning a salary at the rate of $ 100k or more in the current year (2023) then the ability to pay is met. For proof of income in the year 2021 and 2022 you enclose the W-2 statement and for the proof of income for the current year you enclose all the pay slips of the beneficiary for the year 2023.
What if the beneficiary made $ 100k only in the year 2022 but in the year 2021 made only $ 80k. Here there is a shortfall of $ 20k for the year 2021. Now you must show USCIS that although for the year 2021 the beneficiary made $ 20k less than the offered wage the company had a net income which is more than $ 20k.
Which document do you submit to prove that the net income was more than $ 20k?
The document where net income will be shown is IRS Form 1120 which is the US Corporation Income Tax Return used to file the yearly federal tax return by Petitioner. In the Form 1120 you will see Net Income corresponds to the line 28 in tax returns which says, “Taxable income before net operating loss deduction and special deductions”. If this amount is more than the shortfall of $ 20k then you have established the ability to pay.
What if in the line 28 the income is negative which means the company had a loss in the tax returns?
Petitioner can still establish ability to pay by showing that the Net Current Assets can cover the shortfall of $ 20k. To arrive at Net Current Assets, you must add Assets in Schedule L (only from cash to other current assets – Line 1 to 6) and then subtract this by Liabilities in Schedule L (Accounts Payable to other current liabilities, Line 16 to 18). If the Net Current Assets calculation shows that it is more than $ 20k for the year 2021 then the Petitioner can prove that the ability to pay has been established.
There might arise a situation where the tax returns are not available for a previous year because most of the businesses file for extensions to file their taxes and the taxes for prior year will be available only by September and an ability to pay RFE must be responded before that. In such situations Petitioner can either file for the taxes as soon as possible and then respond to RFE or the Petitioners can submit an audited financial statement along with wage reports and quarterly federal returns for the previous years.
What you see from the above is that you must prove ability to pay for each financial year starting the year the PERM labor certification was filed. For every year you must see if the beneficiary was paid the salary offered in the I-140. If there is a shortfall, then you must see if the shortfall can be covered by the Net Income and if that is also not suffice then you look to see if the Net Current Assets can cover the short fall.
There could also be a situation where a beneficiary did not work for the Petitioner on certain years. This could have happened when the beneficiary’s PERM application was filed and later after a year the beneficiary started employment with I-140 petitioner. This is possible since I-140 job offer is a future permanent job offer which the beneficiary is expected to occupy at least after he/she becomes a permanent resident. So, if you twist the above scenario and say the beneficiary’s PERM application was filed in the year 2021 and the beneficiary was employed only in the year 2022. In this scenario the USCIS would expect that the Net Income or Net Current Assets of the I-140 petitioner is more than $ 100k for the year 2021.
As simple as it could sound things get complicated since as per the regulations a I-140 petitioner must prove the ability to pay for all the I-140 beneficiaries. This means the I-140 petitioner must prove that they have ability to pay the offered wage for all the employees for whom the I-140 petition was filed. So, if the Petitioner had filed 10 I-140 applications then Petitioner must prove that they have ability to pay $ 1,000,000 per year. ($ 100,000 times 10 presuming the offered wage for all these beneficiaries were $ 100k). Often some officers would take this line of query in the RFEs and ask for a list of I-140s that were filed by the Petitioner and then ask the Petitioner to prove that they can prove the ability to pay for all these beneficiaries. The way to respond to such RFEs is by creating a report in excel sheet and do a year wise calculation. For every year list the number of I-140s that are pending or approved. Every passing year these I-140s will carry forward unless it is revoked. So, for the year 2021 you will have to prove ability to pay for four I-140 petitions and moving forward to next year 2022 say you filed for another two I-140s then the total I-140 petitions will be six. In the year 2023 say the Petitioner filed for four I-140 petitions. Going by this you in the 2021 report you will have four I-140s, in 2022 you will have six I-140s and in the year 2023 report you will have ten I-140 petitions. For every year you must list the name of the beneficiaries, their receipt numbers, offered salary in I-140 and any shortfalls. Then you add all the shortfalls. Say in the year 2023 for the ten I-140 petitions each of them had a shortfall of $ 20k then you must prove that you have the net income or in the alternative Net Current Assets of $ 200k (20k times 10).
Is there any way out for a Petitioner who is not able to prove ability to pay in a particular year. This is where someone like a CPA or a financial analyst can write a report and show how despite the shortfall and negative net income or net current assets, the petitioner had sufficient funds to pay the beneficiary. One can even claim that for a particular year the whole economy suffered like say when the economy went down during Covid pandemic. You can print financial reports showing how all the companies suffered financially in a particular year and the petitioner was also similarly placed during the downturn in the economy. Will the USCIS buy such an argument? Most probably they might. It all depends on how well the petitioner argues and it is within the discretion of the USCIS to accept such an argument. This is called the totality of circumstances argument which is under the discretion of the USCIS adjudicator to accept or reject.
What do you do if despite your best efforts and I-140 petition is denied for inability to pay?
There is always an option to file for a Motion to Reopen (MTR) followed by an Appeal. Exercising these options depend on beneficiary’s immigration situation especially regarding the six-year time limit. If the beneficiary’s beyond six year stay on H1b in USA hinges on the survival of this I-140 petition then it might be a good idea to exercise the option of MTR or Appeal since one is eligible to file for H1b beyond six years based on the fact that the whole permanent residency process is more than one year old. While this appeal process is going on, the beneficiary can explore other options like filing another labor certification for a different job role with same employer or even filing labor certification through another employer and follow through with I-140 petition with a different employer.
Many petitioners don’t realize that when they plan filing permanent residency (Green Card) process for their employees they must be aware of the ability to pay issues that may impact each of the I-140 applications. As you see from above, they must diligently plan the filings of PERM applications/I-140 petitions so that they don’t get into issues of current salary being lower than the offered salary. This issue adversely impacts employers headquartered in regions with higher prevailing wages like Bay area, Seattle, DC and New York metro region. When it comes to consulting firms prevailing wages are based on the region where the head quarters are located. So, if a beneficiary is employed in Chicago and making an annual salary of $ 80,000 but for the sake of PERM application the wages, if the employer has headquarters in Bay area, could be as high as $ 140,000. Inversely, if an employee is working in Bay area and making $ 140k and the firm is headquartered in Chicago the offered salary on I-140 will be $ 80k which helps with the ability to pay calculation.
Bottomline, the Petitioner must discuss with the Immigration lawyer about the impact of filing of multiple PERM applications especially if the offered wages are lower than the current wages of beneficiary. Depending on number of PERM applications being planned, Petitioner should discuss with their CPA or Tax consultant regarding the minimum net income or net current assets that must be shown for the I-140s to be approved. Beneficiaries before transferring their H1bs should also consider discussing these issues with their potential employer if they have a choice.
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