Based on many posts by users of these boards, I’ve decided to write-up a fairly comprehensive posting regarding ability to pay issues and how to overcome RFE’s, Denials and appeals.
Law governing ability to pay – 8 CFR 204.5(g)(2)
(2) Ability of prospective employer to pay wage. Any petition filed by or for an employment-based immigrant which requires an offer of employment must be accompanied by evidence that the prospective United States employer has the ability to pay the proffered wage. The petitioner must demonstrate this ability at the time the priority date is established and continuing until the beneficiary obtains lawful permanent residence. Evidence of this ability shall be either in the form of copies of annual reports, federal tax returns, or audited financial statements. In a case where the prospective United States employer employs 100 or more workers, the director may accept a statement from a financial officer of the organization which establishes the prospective employer's ability to pay the proffered wage. 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.
Most recent guidance and interpreation from USCIS
There are four ways that ability to pay can be met:
1) For companies employing over 100 employees – A statement from a CFO that the company has the ability to pay the proferred wage will be sufficient.
Following conditions need to be met from priority date (date of the filing of labor with State Agency) to final adjudication of 485/greencard
2) If employee is getting paid at least the proferred wage
If the employee is not getting paid the proferred wage
3) If the net income of the petitioner (employer) is greater then the difference in the proferred wage and actual wages
4) If the net assets – current liabilities is greater then the difference in the proferred wage and actual wage
If any of the above four criteria is met then the 140 shall get approved.
The 140 filing should be accompanied with evidence of ability to pay – per the 140 application this can take the form of:
CFO certification for companies with more than 100 employees – (it is not clear in those situations whether this is good enough if the employer fluctuates so that in certain periods employee count goes over and above 100 employees)
Tax returns of employer
Audited financial statements
As an FYI – an annual report includes audited financial statements plus a general overview of a company (ie., # of employees, CEO outlook, products and services of a company).
It seems that the most common evidence that employers file is a copy of the employees w2. This is then compared to the labor certification to determine if the employee is getting paid at least the proferred wage.
The adjudicator at this point may believe that there is not enough evidence to approve the 140. They can/will request for additional evidence in the form of Tax returns, annual reports, audited financial statements, bank statements, etc.
Most common mistake employers make at this point is to send in tax returns without doing an analysis as to whether there is sufficient net income to overcome deficiency in proferred wage and actual wage. If there isn’t sufficient net income to overcome the deficiency then adjudicator will examine schedule “L” on the tax return which shows the balance sheet. Adjudicator will calculate current assets and deduct current liabilities to see if the difference between those two numbers can overcome deficiency in proferred wage – actual wage.
If you are in this predicament then these are the things you need to do to overcome:
1) Re-calculate the proferred wage to prorate it for that particular calendar year from priority date. For example, if the priority date is 10/01 then the prorated proferred wage should be ¼. Re-calculate actual salary made from 10/01 to the end of the calendar year (from your paystubs). The re-calculated difference is then what you compare with net income on the tax return or difference between net assets-current liabilites. Note, this will only work in the first year.
2) Re-calculate taxable income and add back “tax deductions”. The most common item would be depreciation since it is not a cash item (Amended 8/6/04 - I discussed this with a lawyer, I was given incorrect advice, taxable income needs to be used, depreciation, etc. cannot be added back). This new calculated number should then be compared to deficiency in net income
3) Re-calculate current assets-current liabilities. Essentially, this is where there is some judgement and uscis can make a mistake or the preparer of the financial statements can make a mistake:
Current assets = any item exptected to be turned into cash within the next 12 Months
Current liabilities = any item expected to be paid within the next 12 months
Typical current assets are:
Cash, Accounts Receivasble, prepaid expenses
Typical current liabilities are:
Accounts payable, payroll, loans/lines of credit to be paid within the Next 12 months.
The typical mistake that people make is that any borrowings may be classified as current whereas there should be a breakdown between amounts due in one year and more than one year. For example, a line of credit is usually interest only and since you don’t need to pay principal then it should be classified all as long term.
4) If the corporation has less than $5 million in revenues then it is allowed to file the Tax return on a cash basis. When a return is filed on a cash basis then the balance sheet may not be that accurate since they do not monitor items on an accrual basis. A financial statement can be done which shows accrual basis net income, ie., includes accounts receivable
Some of the items to watch out for is that the tax return may be done on a fiscal year end which does not coincide with the calendar year-end; which is what uscis uses to determine difference in proferred and actual wage. If this is the case and the tax return cannot overcome the ability to pay then you need to do a financial statement just for that period.
When you are responding to the RFE and this analysis is being performed to overcome the ability to pay issue, you or lawyer must clearly discuss priority dates, tax year-end, cash basis and why there is differences and how you came to the logical conclusion. USCIS usually gives less weight to subsequent information if there is not a clear reason for the differences.
Additional items to watch out for:
If your company has a number of people going for greencard, uscis will add all deficiencies in proferred wage for the group and compare it to net income and/or current assets-current liabilities.
Some items where there is a little bit of an unknown:
Pre-approved labor: Since ability to pay needs to be from priority date; would company be allowed to add back to their net income the salary paid to the original person who the labor cert was for and then compare the net income to the proferred wage
If there is a deficiency in actual wage and proferred wage, can the company use a combination of net assets-current liabilities and net income to overcome (my initial thinking would be yes.
If one uses ac21 – When does the ability to pay issue transfer over to the new company, ie., from priority date, date ac21 was used, etc.
If your case gets denied, do not be afraid to use motion to reopen and/or appeal. Although chances of appeal are not good; motion to reopen goes back to adjudicator and this is the best chance for approval. (they do not post the approvals on motion to reopen on the administrative decision web-site).