What changed
The “ability to pay” requirement is a regulatory cornerstone of employment-based immigrant petitions filed under EB-1(B), EB-1(C), EB-2, and EB-3. The rule lives in 8 CFR 204.5(g)(2):
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 regulation specifies the three “primary” forms of evidence — annual reports, federal tax returns, or audited financial statements — and tells USCIS that, for employers with 100 or more workers, an in-house financial officer’s statement may be accepted. The interpretive framework that USCIS adjudicators actually use was set out in the William R. Yates memorandum, “Determination of Ability to Pay under 8 CFR 204.5(g)(2),” issued May 4, 2004. That memo, and its incorporation into the USCIS Policy Manual, Volume 6, Part E, Chapter 4, still controls.
Why it matters
Ability to pay is the most common substantive ground for I-140 Request for Evidence and denial. The proffered wage on the I-140 must match the wage on the labor certification (or, for Schedule A and exempt categories, the wage established by USCIS guidance). The employer must show — for every year from the PERM priority date through the date of I-140 adjudication — that it could pay that wage to the beneficiary on top of all other workers being sponsored on overlapping petitions.
For a venture-stage company that runs at an operating loss, or for a small consultancy whose net income is volatile, this is where the case becomes hard.
Way forward
USCIS adjudicators evaluate ability to pay against three tiered tests under the Yates memo and the Policy Manual.
1. Test 1 — Net income. If the employer’s net income (as shown on the federal tax return) equals or exceeds the proffered wage for each relevant year, ability to pay is established without further analysis.
2. Test 2 — Net current assets. If net income falls short, USCIS will look at net current assets — current assets minus current liabilities — drawn from the balance sheet. Net current assets approximate the cash and near-cash the employer could deploy to pay the wage. If net current assets equal or exceed the proffered wage for each relevant year, ability to pay is established. This is the “net-current-assets workaround” often referenced in I-140 practice.
3. Test 3 — Wages actually paid. If the beneficiary was already employed by the petitioner during the relevant year and was actually paid the proffered wage (or more), that wage payment itself establishes ability to pay for that year. W-2s and payroll records prove it.
4. Test 4 — Totality of the circumstances (Matter of Sonegawa). When none of the first three tests is met for a given year, USCIS may still approve under the “totality of the circumstances” standard articulated in Matter of Sonegawa, 12 I. & N. Dec. 612 (Reg’l Comm’r 1967), discussed in USCIS Policy Manual Vol. 6, Part E, Ch. 4. The Yates memo lists factors that may be weighed: the employer’s reputation in its industry, the historical growth of the business, the number of employees, the prospective profitability, the existence of large but uncollected receivables, one-time expenses that distorted a particular year, the existence of other officers’ compensation that could be reallocated, and the magnitude of any shortfall relative to the size of the business. The Sonegawa analysis is discretionary — USCIS does not have to approve.
Documentation that holds up
The strongest filings include all three primary categories at once: the federal tax return for each relevant year, audited financial statements that tie to the return, and the annual report. For each year, present a one-page ability-to-pay analysis: proffered wage, wages actually paid to the beneficiary (if any), net income, net current assets, and the resulting test passed. For overlapping petitions, list every other I-140 beneficiary the employer is sponsoring and show ability to pay each of them concurrently — USCIS adds those wages together.
For early-stage companies leaning on Sonegawa, lead with the operational story: contracted revenue not yet booked, signed customer agreements, runway from recent funding, and audited statements that tie back to the same numbers. Audited financials carry materially more weight than unaudited ones — that is why 8 CFR 204.5(g)(2) names them explicitly.
Common failure modes
- Comparing the proffered wage to gross revenue instead of net income.
- Forgetting to include wages already paid to the beneficiary during the relevant year.
- Filing a Sonegawa argument without audited financial statements to anchor it.
- Failing to address every year between PERM priority date and I-140 adjudication. A single bad year is a ground for RFE.
Disclaimer
This article is general information from a software company, not legal advice from a law firm. Ability-to-pay arguments under 8 CFR 204.5(g)(2) are accountant-heavy and fact-specific, and a single overlooked petition for another beneficiary can sink the case. Verify everything against the primary source — 8 CFR 204.5(g)(2) and USCIS Policy Manual Vol. 6, Part E, Ch. 4 — and engage qualified counsel before filing.