Congress taps H-1B fees to pay for legislation

Lawmakers have a new addiction: H-1B fees to fund border security, and now the 9/11 bill

The H-1B and L-1 visa program is becoming an increasingly important source of money for Congress as it tries to pay for the cost of new legislation, including the pending 9/11 health bill.

In August, Congress approved a $2,000 fee increase on H-1B visas and a $2,250 increase for L-1 visas for those firms that have more than 50% of their workers on the visa.

Most affected by this fee increase, set to expire in 2014, are Indian offshore firms that rely heavily on work visas to deliver services to U.S. customers.

Congress is now considering extending this visa fee increase through 2021 to help cover the cost of the 9/11 responders health care bill, which is now set at $6.2 billion.

In a joint statement this week, U.S. Senators Kirsten Gillibrand and Charles Schumer, both from New York, said the extension will continue "leveling the playing field between companies that follow the Congressional intent behind these visa programs and companies that use these visas to outsource American jobs."

Schumer, who championed the H-1b and L-1 fee increase to help pay for the $600 million border security bill, argued in August that it creates incentives to hire U.S. workers.

"Our bill will make it more expensive to bring in foreign tech workers to compete with American tech workers for jobs in America. That means these companies are going to have to start to hire U.S. tech workers again," Schumer said.

But the Congressional Budget Office (CBO) revenue estimates appear to say something else. If the fee increase provided an incentive to hire U.S. workers over foreign workers, then the revenue might show a decline over time.

But the CBO numbers show gradually rising revenue from the visas, not declining revenue. The CBO estimates also appear high, especially in the 9/11 bill, and difficult to explain.

The work visa fee increase raises broader questions as well. Will a need for visa fees to help pay for 9/11 health care and border security deter Congress from putting restrictions on the H-1B program for fear of cutting fee revenue?

Will the fee revenue encourage Congress to expand the H-1B visa program beyond its 85,000 cap? The L-1 visas, also subject to the fee increase, are used by multinational companies to move their foreign worker into the U.S.

The CBO has set some high revenue expectations for the fee. In the border security bill, the CBO estimated the visa fee increase will produce $133 million in 2011, gradually increasing to $143 million in 2014. When the CBO developed estimates for the 9/11 bill, its revenue forecast jump to $305 million in 2016 rising to $311 million in 2020.

The CBO doesn't explain how it arrived at its estimates and that is prompting head scratching.

Crystal Williams, executive director of the American Immigration Lawyers Association, said she could not explain the CBO estimates, and said the CBO may be expecting more visa petitions when "the trend is running in the other direction."

"I think there is a lot of creative mathematics," Williams said of the CBO projections.

The New Delhi-based National Association of Software and Services Companies (NASSCOM), estimated in August that the fee increase will be apply to about 45,000 to 50,000 H-1B and L-1 visas annually. The fee applies to new visa applications and transfers.

Daniel Costa, immigration policy analyst at the Economic Policy Institute, said that based on NASSCOM's overall number, if 50,000 work visas are subject to the fee, it would raise $103.5 million. (The estimate may not account for the cost of visa applications that are denied and aren't refunded.)

That estimate isn't far from $133 million in visa revenue forecasted by the CBO in 2011 but is well short of the more than $300-plus million in annual visa fee revenue estimate for the 9/11 bill.

The reliance on H-1B fees by Congress may have other impacts as well, particularly on a longstanding effort by Sens. Dick Durbin (D-Ill.) and Charles Grassley (R-Iowa) to limit the number of H-1B or L-1 visas to 50% of a company's U.S. workforce, the so-called 50/50 rule.

The Durbin/Grassley legislation "would eliminate the main source of funding for the border security bill and one of the main sources for the 9/11 health bill," said Costa.

"If this amendment passes and the visa fees get extended as part of the 9/11 health bill - although the 50/50 companies are clearly offshoring jobs and harming US workers, I doubt anything will be done about it, because for the next decade, they'll be picking up the tab for aerial drones on the border, border patrol agents and health care for the heroes of Sept. 11," Costa said.

Prior to the $2,000 fee increase, to file a H-1B visa petition mean paying a $320 filing fee, a $500 antifraud fee that is required for any new H-1B and L-1 visa user, and a fee for training U.S. workers that scales from $750 to $1,500, depending on the size of the company applying for a visa. Many companies also pay $1,000 extra for what's called premium processing to accelerate handling of the visa.

The fee increase does create an incentive to for offshore firms to hire U.S. workers, but that was something offshore companies were doing anyway, said Anand Ramesh, research director at Everest Group, an outsourcing consultancy and research firm.

But he said the increased fee itself is having a "negligible' impact on offshore companies, said Ramesh. "We are not seeing services providers trying to do anything different," he said.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov or subscribe to Patrick's RSS feed . His e-mail address is .

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Copyright © 2010 IDG Communications, Inc.

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