When a petition is filed for an employment-based immigrant worker (I-140 petitions), the United States employer must demonstrate its ability to pay the prevailing wage from the date the priority date is established (i.e. the date of the filing of the labor certification) until the case is adjudicated.
The prevailing wage is determined by looking to workers "similarly employed" in the "area of intended employment." In other words, an accountant in Los Angeles, CA will have a different prevailing wage than an accountant in Memphis, Tennessee. Often times, USCIS denies I-140 petitions on the basis that the petitioning employer does not have the ability to pay.
The governing regulation at 8 C.F.R. 204.5(g)(2) states in pertinent part:
Evidence of this ability [to pay the proffered wage] shall be either in the form of copies of annual reports, federal tax returns, or audited financial statements...in appropriate cases, additional evidence, such as profit/loss statements, bank account records, or personnel records, may be submitted by the petitioner or requested by the Service.
Decisions regarding ability to pay are normally based only on the Petitioner's federal income tax returns and all appropriate schedules. For example, USCIS recently denied a Petitioner's I-140, Immigrant Petition for Alien Worker on the basis that the petitioner's taxable income before net operating loss deduction and special deductions, or net current asset was less than the beneficiary's full proffered wage.
On May 4, 2004, USCIS released the Yates Ability to Pay Memorandum outlining the tests to be applied when determining an employer's ability to pay. The memo provided three alternative methods to demonstrate an employer's ability to pay the proffered wage:
- The Net Income Test - This is the standard method whereby the petitioner's net income is equal to or greater than the proffered wage.
- The Net Current Asset Test - For employers whose financial reports indicate net losses, this is a method that looks at petitioner's net current assets to make sure they are equal to or greater than the proffered wage. Current assets include cash on hand, inventories, and receivables expected to be converted to cash within on year.
- Actual Payment Test - For employers who are employing the alien worker but also have paid or are currently paying the proffered wage, this method is based on the logical assumption that the alien has been paid in the past so the employer would continue to pay the proffered wage.
While the Net Income Test appeared at first glance to be a logical analysis, USCIS' method in arriving at the conclusion is solely on a cash basis tax adjustment whereas some employers may report their tax returns on an accrual basis. As such, there are other indicators of wealth such as accounts receivable, loans receivable, company's borrowing power in determining the Petitioner's ability to pay the proffered wage that were not accounted for. Thus, a competent attorney preparing employment-based immigrant petitions must not only be familiar with the immigration law component of the case, but perhaps more importantly, must be familiar with how to read and interpret tax returns.
Given the complexity of the ability to pay issue, in addition to hiring competent immigration counsel, we often recommend the hiring of an independent financial expert to review the Petitioner's business assets, Quarterly Wage and Withholding Reports, Employee Earnings Summaries and W-2's. Independent expert testimony in the form of writing may serve to overcome any doubts the CIS has about an employer's ability to pay the prevailing wage.
The likelihood of an approval is greater if the Petitioner can establish its ability to pay the proffered wage through evidence of the totality of its financial circumstances, including its substantial annual net current assets, good reputation, substantial capitalization, ample wages paid to its employees, and payment of actual wages to the beneficiary in excess of the proffered wage.
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