Understanding the concept of “affordability” when assessing a company’s ability to file an employment-based immigrant petition.
Disclaimer: The following is written to provide a very general basic outline of the visa or immigrant process described below. It is meant to be general in nature and outlines simply some aspects of a very detailed process. Do Not Rely on the information which follows for instructions, nor as constituting legal advice.
When a U.S. company sponsors a foreign national for permanent residency through an employment-based immigrant petition, such as the Form I-140, it must demonstrate more than just a willingness to hire. A critical part of the process involves proving the company’s financial ability to pay the offered wage. This requirement ensures that the job offer is genuine and that the employer has the financial means to support the worker from the date the labor certification is filed (i.e. priority date) until the worker becomes a lawful permanent resident. This concept, often referred to as “affordability,” is central to the petition’s success. While it may seem straightforward, the legal and financial nuances involved can be complex and are frequently misunderstood by both employers and legal practitioners.
To satisfy this requirement, the employer must submit credible financial documentation. This typically includes federal tax returns, audited financial statements, or annual reports. If the company employs 100 or more workers, a statement from a financial officer may also be accepted. In cases where the foreign worker is already on the company’s payroll and receiving the offered wage, payroll records and monthly pay slips also serve as strong evidence of the company’s financial ability to pay the proffered wage. The U.S. Citizenship and Immigration Services (USCIS) uses this documentation to assess whether the job offer is viable and whether the worker is likely to become a public charge. The burden of proof lies entirely with the sponsoring employer, and failure to provide adequate evidence can result in a request for further evidence or outright denial of the petition.
As with most legal matters the devil is always on the detail and these details could result in your petition receiving a request for further evidence or being denied if you are not careful, prior to submission to assess the supporting financial documentation, with great scrutiny. The onus is on the sponsoring company to ensure the tax return meets the required standards prior to submitting the I-140. In assessing whether your corporation meets the affordability criteria there are broadly three general levels of inquiry that USCIS and case law have referred to and these are set out and discussed below:
1. First level of Inquiry: Have the wages been paid?
The first and most straightforward is whether the employer has already been paying the foreign worker the proffered wage. If so, this can be sufficient to meet the requirement, as it demonstrates a consistent ability to pay. If the employer has already been paying the foreign worker the proffered wage, this is strong evidence of affordability. Consistent payroll records and recent W-2s, can satisfy USCIS that the company is financially capable of continuing to pay the wage.
2. Second level: Net Income: Is the company profitable as evident in the most recent tax return?
If the wage has not yet been paid, USCIS will turn to assessing the company’s profitability. Hence the second level of inquiry is a scrutiny of what profit is prima face reflected on the most recent tax return, as “net income” or “ordinary income” as being the “net income”. Where these figures are equal to or exceed the proffered wage the company the affordability criteria are met. Since companies are automatically entitled to an extension of six month on application to the IRS of their annual tax return, timing matters when submitting the nonimmigrant petition as to whether USCIS will accept the most recent return. If your petition includes an extension be aware that USCIS may take their time processing this petition and you may well have to provide the subsequent return if a request for this is forthcoming. When reviewing a tax return the page 1 of Form 1120 of the US corporation tax return is relevant and shows a summary of the company’s profitability. This depicts whether the corporation has made sufficient income in the year of filing. It shows the gross receipts or sales, and although this does not show profitability alone, it records company turnover and activity levels of the business. If the corporation is trading, it should be reflecting active income and not merely passive / investment income. Whether income is perceived as active / passive dependent on the nature of the business, interest or dividend income or typically not active trading income but royalties may be depending on the nature of the business. Deductions list the expenses in categories, including salaries. At a glance salaries reflect whether the corporation is sufficiently large to be employing 10 employees, which is what you should ideally be employing, to justify an I-140 petition. Taxable income at line 30 reflects the company’s net profit for tax purposes. This shows there is sufficient surplus to pay the proposed wage for the I-140 petition, and that the corporation profitable.
3. Third level of inquiry: The net asset value of the company
Schedule L of Form 1120 is the company’s balance sheet and reflects the net asset value at a point in time. A strong net asset position can demonstrate that the company has sufficient financial reserves, in the form of retained income or tangible assets to support paying the proffered wage, even in the absence of adequate profits in any one tax year. The higher this value the more financially sustainable the corporation presents.
Sometimes a company has a “bad year” or is in a start-up phase building up towards being more profitable. In this case the tax return may not be able to justify the proffered wage. It may not be advisable to submit the I-140 in this situation, since the levels of inquiry stipulated above are not subject to broad interpretation and profitability is not justifiable by creative means through business plans or forward-thinking financial projections. Although such projections are acceptable for purposes of nonimmigrant petitions or visas, such as an E-2 or L-1A these will not suffice for an employment based.
In summary the tax return showing the company is profitable or at least has sufficient assets to demonstrate it can pay the salary for a substantial period of time if required, the number of employees it already employees and whether the company has been actually paying the proposed employees salary historically, are all necessary and vital to justify an I-140 petition. The financial scrutiny essential in this process determines whether the employment offer is viable, and whether beneficiary will not become a public charge. If your tax return and the financial viability of the company are questionable it may be best to delay the filing of the petition until the company can reflect this in time. Be sure to review all documents with an immigration attorney to assess this upfront before filing an immigrant petition for an alien worker petition and subsequently realizing that the timing of the submission was not ideal.
