One of the most critical parts of an I-140 Immigrant Petition filed in the Employment-Based Green Card application is the employer being able to prove their ability to pay the proffered wage. If an employer is unable to prove ability to pay, the I-140 cannot be approved.
For many employers, this requirement can be burdensome. However, identifying issues related to ability to pay and doing the proper planning, you are well prepared before they arise.
My Case Scenario
The Salizar Corp. is preparing to file a PERM Labor Certification application on behalf of their employee Robert. The DOL has issued a Prevailing Wage Determination which states that the proffered salary for the offered position must be no less than $150,000.
Robert is currently getting paid $50,000 per year. The company posted losses for the most recent tax year. The company now needs to figure out how it can cover a $100,000 shortfall in proving ability to pay or the I-140 will not be approved when it’s filed. They don’t want to continue preparing the PERM application unless they are confident they can prove the ability to pay at the I-140 stage.
What are their options?
1. Ability To Pay The Proffered Wage – The Basics
The regulations require that every employment-based immigrant visa petition that requires a job offer must be accompanied by evidence that the U.S. employer has the ability to pay the “proffered” wage as of the priority date continuing until the date the beneficiary obtains permanent residence or the “green card”. The priority date is the date the labor certification is filed with DOL or the date the I-140 is filed with USCIS, if no labor certification is involved.
For cases involving a labor certification and I-140 Schedule A petitions, the employer must obtain a Prevailing Wage Determination (PWD) from the Dept. of Labor (DOL). The proffered wage must meet or exceed the PWD. For all other employment-based petitions that do not involve a labor certification (EB-1, EB-2 NIW, and I-360 petitions), the proffered wage is set by the employer.
Note: Proving ability to pay is not required for self-petitioned I-140 (EB-1A and EB-2 NIW) as there is no job offer.
The burden always remains on the petitioner to establish it’s ability to pay the “proffered” wage when submitting the Form I-140, Petition for Immigrant Worker. Failure to prove the ability to pay the proffered wage will result in the denial of the I-140.
Employers should perform an assessment of ability to pay as soon as the PWD is issued and before the labor certification application is filed. A reassessment should also take place if there are changes to the financial health of the employer while the labor certification is pending.
2. Establishing Ability To Pay – Initial Required Evidence
In order to prove ability to pay, all I-140’s which involve a job offer must be accompanied by:
1. Annual reports, federal tax returns, or audited financial statements
NOTE: If submitting an audited financial statement, it must actually have been prepared by a certified public accountant and the statement should be accompanied by a statement from the accountant certifying that the report therein is based on audited figures.
2. In the case of an employer with more than 100 employees, a statement from a financial officer of the organization regarding its ability to pay the proffered wage
NOTE: The statement from a financial officer of the company must be on the letterhead of the company, confirming that the company has more than 100 employees and that it has the ability to pay the proffered wage to the sponsored employee. USCIS may request additional evidence to prove that the company does indeed have more than 100 employees.
Failure to provide the initial required evidence will result in USCIS sending a Request for Evidence (RFE) or Notice of Intent to Deny (NOID). USCIS will send an I-140 RFE or NOID even if the employer has provided alternative evidence which proves the ability to pay.
3. How Is Ability To Pay Determined?
In determining ability to pay based on the initial required evidence, the USCIS officer must determine if:
- The Net Income is equal to or greater than the proffered wage; OR
- The Net Current Assets are equal or greater than the proffered wage; AND/OR
- The Employee’s salary is higher than the proffered wage.
Net Income and Net Current Assets cannot be used in combination to prove ability to pay. The wages can be used to prove ability to pay by itself, or in combination with the Net Income OR Net Current Assets.
In order to prove ability to pay, USCIS will either take the Net Income or NCA or either in combination with the actual salary of the beneficiary.
If the proffered wage is $70,000 and the net income is $40,000, it is too low. If the beneficiary is getting paid $45,000, then the petitioner can use the net income in combination with the beneficiary’s salary to prove ability to pay. The same can be done with Net Current Assets.
4. How To Compute Net Current Assets
Net Current Assets (“NCA”) are the difference between a company’s current assets and current liabilities. The calculation of net current assets is done through an examination of a company’s tax returns or audited financial statements. USCIS allows an examination of net assets as some assets are not necessarily included in the calculation of a company’s net income but evidence a company’s financial stability. The calculation of net current assets depends on the type of financial document submitted by the employer:
1. Corporation – Form 1120 or Form 1120S
In order to calculate the NCA, go to Schedule L of the Form 1120 or Form 1120S. The NCA is calculated by taking the difference between current assets [1(d) to 6(d)] and current liabilities [16(d) to 18].
2. Partnership – Form 1065
In order to calculate the NCA, go to Schedule L of the Form 1065. The NCA is calculated by taking the difference between current assets [1(d) to 6(d)] and current liabilities [15(d) to 17(d)].
3. Audited Financial Statement/Annual Report
The most appropriate calculation would be to take the difference of “current assets” or “total current assets” and “current liabilities” or “total current liabilities.” It is important not take the difference of total assets and total liabilities as the difference there will always be “0.”
5. Establishing Ability To Pay – Discretionary And Additional Evidence
Under the regulations, where appropriate, additional evidence like profit/loss statements, bank account records, or personnel records, may be submitted by the petitioner or requested by the USCIS to supplement the record.
As per USCIS regulations and USCIS Memoranda, employers may submit a financial statement in lieu of initial evidence and/or additional evidence such as profit/loss statements, bank account records, or personnel records. However, acceptance of these documents by USCIS is discretionary. If USCIS exercises discretion to accept either the financial statement or additional financial evidence, that evidence must clearly establish the employer’s ability to pay. If USCIS has any doubts about whether the additional documents establish the employer’s ability to pay, USCIS may deny the petition and not issue RFE for additional evidence to further clarify the discretionary evidence that was accepted.
In the case of a future job offer, an employer may be able to prove ability to pay by using the wages of the employee that the applicant is or will be replacing.
6. Overcoming Ability To Pay Issues
How do you establish Ability to Pay if your net income, net current assets and/or beneficiary’s salary are deficient?
The analysis of ability to pay does not necessarily end at the net income, NCA or a beneficiary’s salary. There are several other ways in which you can establish the ability to pay.
Although the bank statements or bank account records are listed as acceptable supplemental evidence in the regulations, USCIS has severely limited the usefulness of these records. There are instances however, where bank statement or bank account records can help to prove ability to pay.
- Where a tax return or audited financial statement is not available for a certain period of time, the bank statements covering that period can be submitted to show that company has enough cash-on-hand to pay the beneficiary. It is important to note that the ending balance of each month must exceed the proffered monthly wage of the beneficiary.
- Statements for Lines of Credit, which are usually not reflected on tax returns, may be submitted to show additional resources for ability to pay.
Compensation of Officers
Ability to pay can be established by the election of the officer(s) of a corporation to reduce their compensation, or a partner in a partnership to reduce their share of net income or profits.
- Privately held corporations and closely held corporations have the option of paying officers a salary, whereby reducing the company’s net income. In many instances, the amount paid to the officer(s) is determined by the company in order to specifically reduce the company’s net income, thereby reducing that company’s tax liability. Therefore, the officer(s) of the company can decide to reduce or forgo a portion of or the entire amount of officer compensation in order to pay the beneficiary.
- The net income or profits of a partnership generally are to be divided between the partners. In order to use the net income of a partnership, the partners must agree to reduce their share in order to pay the beneficiary.
It is important to remember that when an officer or partner elects to reduce their income from the business, he or she is electing to reduce what is already considered personal income. The officer or partner must be ready and willing to submit documents (personal tax returns, personal expense reports, etc.) that show that the officer can continue to support himself or herself as well as any dependents even with a reduction in income.
‘Totality of Circumstances’ Argument – Showing that the low net income or losses are due to a specific temporary situation
How does an employer establish Ability to Pay if the company has been losing money? The decision in a case called Matter of Sonegawa may help!
In the Matter of Sonegawa, the Court ruled that in making a decision about ability to pay, USCIS must look at the “totality of the circumstances.” The Court said that looking at net income in isolation, when other evidence is also given, is not only insufficient, it is improper.
The ruling in Matter of Sonegawa can help an otherwise unapprovable case in several ways:
1.Several successful years of profits followed by 1 or 2 less successful years:
An employer may be able to prove ability to pay by showing that the company was successful and had the ability to pay in the past but an unexpected event caused a temporary reduction in financial viability. You must then be able to show that things are changing, or turning around and you realistically expect to be successful again.
2.Reduction in income due to expansion:
Reduction in income may occur as money is spent on expansion. A company can prove ability to pay by showing the strong financial viability in the past and proffer evidence about the expansion plans with strong evidence that the expansion will increase profits.
New companies have an especially difficult time establishing ability to pay. This does not, however, mean that a new company cannot necessarily sponsor someone for permanent residence. The methods mentioned above can be used in the context of a new company. Further, arguing totality of the circumstances may also help. A new company, for example, can show a steady increase in revenues as well as other verifiable evidence that the company’s outlook is good. Further, the company can argue that the addition of the beneficiary is specifically to further increase profits.
My Case Scenario
Upon a review of their tax returns and speaking with the accountant, Salizar Corp. saw that they had over $120,000 in net current assets. The NCA in combination with Robert’s salary exceeds the proffered wage.
Salizar Corp. can continue preparing the PERM application confidently with the fact that they will be able to prove their ability to pay the proffered wage when filing the I-140.
My Case Scenario
Started a year ago, Yamasaki Corp. specializes in making an important part needed for building computers. The company has contracted with several large, world-renown computer manufacturers to provide them with the part they need. Yamasaki Corp. offered Mary, a foreign national, the position of General Manager of the company. In addition to sponsoring her for the work visa, Yamasaki Corp. is also sponsoring her for an employment based Green Card through the labor certification process. When Yamasaki Corp. received a Prevailing Wage Determination of $60,000 from DOL, Mary was getting paid $40,000, and their first year tax returns showed a net loss of $50,000. Yamasaki Corp. would like to offer her the higher salary when she gets the green card but it’s not sure how to prove ability to pay at the I-140 stage.
Notwithstanding the fact that their tax returns show a loss, Yamasaki Corp. has major contracts in place with large, well-known companies which show that their revenues will dramatically increase this year. Providing evidence of the contracts, retainers already received and letters of intent from these companies, Yamasaki Corp. may be able to show USCIS that the company will be able to pay her $20,000 above the $40,000 she is already receiving.
Furthermore, the company had paid their sole officer $250,000 in officer compensation. This officer reviewed his financial situation and took a reduction of $20,000 in his compensation to pay Mary, and the proffered wage would not affect his ability to pay his own expenses or support his family. He is willing to issue a letter stating that he would be willing to forgo $20,000 of his compensation or any amount necessary to cover the proffered wage.
For companies that have strong net income on their tax returns, or over 100 employees, or where they are paying their employee at or above the proffered wage, the task of establishing ability to pay is relatively straightforward. For others, however, there is a need to look beyond the first page of the tax return.
The key is to remember that there are alternative methods to proving ability to pay – those suggested by USCIS as well as tried and tested methods used by immigration lawyers and confirmed by USCIS through approvals.
If you have any questions regarding filing Green Card, or any US work visa, our top business immigration lawyers will be happy to assist you. Schedule A Free Consultation Today >
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