Ability to pay
The ability to pay was a subject of a recent Yates memo. See and read (if you feel like it) the attached reference: (from "www.cyrusmehta.com"). In this way you can defend yourself better.
The relevant regulation states:
“(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.”4
In a memorandum by William Yates on May 4, 2004, policy guidance was issued
in anticipation of regulatory amendments to 8 C.F.R.§204.5(g)(2). A discussion of
the memo follows.
The Yates Memo on Financial Ability
The Financial Ability memo states that a petitioner must submit the regulatory
required evidence of annual reports, federal income tax returns, or audited
financial statements as initial evidence of financial ability. It also discusses the
circumstances where discretionary evidence may or may not be used.
Required Evidence. Adjudicators must first review the file for any missing initial
evidence. Upon review of any one of these items, adjudicators must issue an
RFE if any of these initial documents is missing from the record. Second,
adjudicators must review Form I-140 for completeness. A mandatory RFE must
be issued if Form I-140 is incomplete with regard to the date the petitioning
company was established, the current number of employees, and gross and net
annual income.
Consistent with the companion memo, Yates states that if the record is complete
with respect to all the required initial evidence, adjudicators are not required to
issue RFEs for additional evidence to support the financial ability decision on the
record and may deny the I-140 petition without an RFE.
After the required evidence of annual reports, federal income tax returns, or
audited financial statements is submitted with the I-140 petition, the memo
shows how a petitioner can have financial ability to pay the proffered wage
through three ways: First, if the net income is equal to or greater than the
proffered wage, there is financial ability. Second, if the net current assets are
equal to or greater than the proffered wage, financial ability exists. Finally, a
finding of financial ability can also be made by evidence of the employment of
the beneficiary by the petitioner at the proffered wage level. If any one of
these options are not met, the case can be denied.
Unfortunately, the memo disregards long accepted practices, which have
permitted a showing of financial ability using a combination of any of the three
options listed. For example, let’s assume the proffered wage in an I-140 skilled
worker case is $90,000 per year. The beneficiary received wages of $60,000 in
the year the priority date was established, with minor increases in subsequent
years leading to the RFE. Under the first option in the Yates memo, if the
petitioner’s net income was $20,000, the petitioner would not meet the financial
ability test because of a $10,000 defecit. Consequently, the case would be
denied. If the third option is used, financial ability test would also fail because
the beneficiary was paid less than the proffered wage. The second option is the
most limited in that it uses the net current assets analysis in a substantially
narrower way than accepted practices.
The Yates memo should have implemented principles established in the minutes
of the Eastern Service Center (ESC)/AILA Liaison Teleconference of November
16, 1994,5 where the then Director of the Vermont Service Center offered these
helpful observations:
“(1) If the taxable income on the petitioning company’s submitted tax return, for
the period covering the priority date for the I-140, is at least as high as the
wage offered, the ESC will generally assume that it can afford to pay the wage,
(2) If the taxable income is negative even though the beneficiary is not yet
employed by the petitioner, ESC will generally assume that the petitioner can
handle the additional salary if, according to its tax return, it has a favorable
enough ratio of total current assets to total current liabilities.
(3) In the case of a sole proprietorship, the ESC may consider the proprietor’s
personal assets and liabilities.
(4) It will look closely however at the argument that the hiring of the beneficiary
will turn an unprofitable company into one that can pay his or her salary.
(5) A positive retained-earnings figure does not guarantee the ability to meet a
larger payroll.
(6) Depreciation can generally be considered with taxable income in evaluating
the ability to pay the additional employee.
(7) Where the evidence is not self-explanatory, pertinent figures should be
highlighted and guidance offered on how the documentation establishes the
ability to pay.” (Emphasis added).
The Yates memo unnecessarily limits the financial ability examination to the
following equation:
Net Current Assets > Proffered Wage = Financial Ability.
Item two (2) above suggests that the ratio analysis can be used if there is
negative net income and the beneficiary is not yet employed by the petitioner.
The rationale is that a favorable ratio suggests the petitioner can handle an
additional salary even when there is a loss in the tax year.
However, this writer suggests that the Current Ratio Analysis could be used to
determine ability to pay, regardless of negative net income and employment of
the beneficiary. According to generally accepted accounting principles, the
Current Ratio and the Quick Ratio are basic measures for determining the
liquidity of a company. The Current Ratio is determined when dividing the current
assets with the current liabilities. The Current Ratio assumes (1) a regular cash
flow and (2) that both accounts receivable and inventory can be readily
converted into cash. A ratio of 2.0 is a common indicator of healthy financial
viability. When the Current Ratio falls lower than 1.0, it indicates a company’s
financial difficulties. Therefore, the Current Ratio Analysis is a more realistic
means to test financial ability than the net asset test described in the memo.
Similarly, depreciation should be added to net income, wages paid to the
beneficiary, and the ratio analysis. Depreciation by definition is not considered a
loss.
Discretionary evidence. The regulation states, “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.”6 Subsequently, the
regulation lists discretionary evidence which may be asked for by the Service or
submitted by the petitioner in appropriate cases. By using the phrase, “in
appropriate cases,” the drafters intended for the financial ability regulation to
have different tiers.
Taken as a whole, the regulation has three tiers: (1) Required evidence; (2)
Discretionary evidence for companies with 100 or more employees; and (3)
Discretionary evidence in general.
The memo interprets the regulation to permit the submission of additional
financial evidence in lieu of the initial required evidence where the petitioner
employs more than 100 employees (tying the second and third tiers). Additional
financial evidence has always been submitted to bolster either the required
evidence or for companies with 100 employees or more. But more disturbing is
the expansion of this requirement. Yates states, “regardless of the number of
employees the petitioner employs, CIS adjudicators are not required to accept,
request, or RFE for additional evidence. Acceptance of these documents by CIS
is discretionary.” The conclusion is: if the initial evidence submitted does not
establish petitioner’s financial ability to pay the proffered wage, adjudicators are
permitted to outright deny the petition..........................
Article:
http://www.cyrusmehta.com/ News articles, Page 2, June 7, 2004.
Note: Your employer should show financial statements (ability to pay) from the time of the visa availability/LC approved to GC approved.....
Change from this memo (MAy 2004): The conclusion is: if the initial evidence submitted does not
establish petitioner’s financial ability to pay the proffered wage, adjudicators are
permitted to outright deny the petition..........................
