USCIS Guidance on H-1B Cap Exemptions

Last fall, U.S. Citizenship and Immigration Services (USCIS) adopted a new rule regarding determinations of certain cap-exempt H-1B employers, chiefly nonprofit organizations. The regulation supersedes a policy memorandum promulgated in 2008, which delved into evaluating a foreign alien’s employment at an institution of higher education, a related or affiliated nonprofit entity, a nonprofit research organization, or a governmental research organization. Collectively, these organizations are qualifying cap-exempt employers.

Gist of the New Rule

At issue in the revised regulation is determining how a nonprofit entity can be “related or affiliated” with an institution of higher education and thereby earn exemption from the annual cap. In sum, to be cap-exempt, a related or affiliated or nonprofit entity must meet one of the following criteria, the last of which is new:

  1. Both the institution of higher education and relevant nonprofit share ownership or control by the same board or federation;

  2. The nonprofit is itself operated by an institution of higher education;

  3. The nonprofit is attached to an institution of higher education as a member, branch, cooperative, or subsidiary; or

  4. The nonprofit entity has entered into a formal written affiliation agreement with an institution of higher education that establishes an active working relationship between the two for the purposes of research or education; further, a fundamental activity of the nonprofit organization is to directly contribute to the research or education mission of the institution of higher education.

(The full text of the regulation is available here.)

Underlying Context

The updated regulation seems to have stemmed from a specific type of affiliation in the cap-exempt H-1B context: that of a hospital with an institution of higher education. Previously, the process of evaluating such a relationship to determine whether cap exemption applied was ambiguous, and many college- or university-affiliated hospitals were denied cap-exempt status.

As of this year, when the regulation went into effect, more hospitals are likely to be deemed eligible for cap exemption. For one, the inclusion of the term “fundamental activity” in lieu of “primary purpose” in the fourth criterion above is broader, and nonprofits asserting affiliation with an institution of higher education are accordingly allowed to engage in more than one such activity, provided that at least one directly contributes to the college or university.

The Gray Area

In both policy memoranda, USCIS is attempting to clarify what it deems a qualifying cap-exempt organization. Confusion had arisen because both qualifying and non-qualifying organizations were claiming exemptions from the cap. Non-qualifying petitioners would base their claims on the fact that the aliens they wanted to hire would be performing all or part of their duties at a qualifying institution. In response, USCIS has determined that, based on congressional intent, aliens who are not employed directly by qualifying institutions can be exempted from the H-1B cap, provided that the non-qualifying petitioner is able to show that the alien’s employment promotes the “fundamental activity” of the qualifying institution at which the aliens will be working.

More simply put, non-qualifying institutions can be exempted from the H-1B cap if they show that a connection exists between the work performed by the alien beneficiary and the work performed by the qualifying institution where the alien will work.

Consider the following examples.


Ads for Daze is a for-profit marketing agency. As such, the company is not a qualifying cap-exempt institution. Ads for Daze has filed an H-1B petition for a prospective alien employee. In the petition, the company indicated that the alien would be working at a governmental research organization, which is a qualifying cap-exempt institution, to further the research organization’s purpose by performing tasks equivalent to those performed by employees of the research organization.

Will the prospective alien employee be exempted from the cap?

Yes. The alien will be working at a qualifying institution and performing the same tasks that workers at the qualifying institution perform in order to promote the qualifying institution’s goals.


Rezurch, a for-profit research company, wants to hire an alien by way of an H-1B application. The company has an agreement with a neighboring institution of higher education, the University of Hooyou, to allow the alien researcher to use the university’s lab to perform research for the company. Because of this arrangement, Rezurch hopes its H-1B application will be exempted from the cap.

Will the company’s H-1B petition be cap-exempt?

Unfortunately, no. Rezurch is not a qualifying cap-exempt institution in its own right, and because the research performed at the university, which is a qualifying cap-exempt institution, only furthers the purposes of the company and not the “fundamental activity” of the university, the petition would not be exempted from the cap.

Additional Definitions

The above-referenced memos also elucidate how USCIS determines which nonprofit research and governmental research organizations qualify as cap-exempt institutions. A nonprofit research organization is “an organization that is primarily engaged in basic research and/or applied research.” And a governmental research organization, according to USCIS, is “a United States Government entity whose primary mission is the performance or promotion of basic research and/or applied research.”

For more detailed information on the H-1B category, including minimum requirements and USCIS policies, refer to the following links:

General H-1B Topics

H-1B Articles


Updated 05/08/2017