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High-Skilled Immigration: Firm-Level Complementarity, the Wage-Weighted Lottery, and the September 2025 H-1B Visa Tax Debate

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High-Skilled Immigration: Firm-Level Complementarity, the Wage-Weighted Lottery, and the September 2025 H-1B Visa Tax Debate

The high-skilled immigration landscape in the United States is undergoing unprecedented structural and legal changes. Following the September 19, 2025 Presidential Proclamation No. 10973, which mandated a $100,000 payment for all H-1B visa petitions filed for individuals outside the U.S., a fierce legal battle erupted. In June 2026, the U.S. District Court for the District of Massachusetts vacated this policy nationwide in State of California v. Mullin. On July 24, 2026, the U.S. Court of Appeals for the First Circuit denied the federal government's emergency stay motion, keeping the fee blocked. In response, on August 25, 2026, the Department of Homeland Security (DHS) published a proposed rule establishing a new $103,265 fee per cap-subject H-1B petition under a novel statutory cost-recovery theory.

The Legal Setback: State of California v. Mullin

In State of California v. Mullin, a coalition of twenty states challenged the original $100,000 fee, arguing that it devastated public universities, school systems, and healthcare providers reliant on highly skilled foreign professionals. The District Court agreed, vacating the policy under the Administrative Procedure Act (APA) as an unconstitutional executive intrusion on Congress's taxing authority.

The First Circuit refused to reinstate the fee while the government's merits appeal is pending. Denying the emergency stay, the panel ruled that the executive branch had failed to show a likelihood of success, pointing out that Congress has historically been explicit in authorizing immigration-related fees and that broad presidential authority to restrict entry under 8 U.S.C. §§ 1182(f) and 1185(a) cannot be read to authorize a massive payment requirement without clear congressional intent.

The DHS Pivot: The $103,265 Proposed Fee

With the proclamation-based fee blocked, DHS published a proposed rule on August 25, 2026 (RIN 1615-AD20), establishing a $103,265 fee for all cap-subject H-1B petitions, including those under the 20,000 advanced-degree exemption. While it exempts cap-exempt institutions (such as universities and nonprofit research organizations), the fee would apply to all corporate sponsorships. Critically, if the original $100,000 proclamation fee is later upheld on appeal, employers sponsoring workers from abroad could face a combined cost exceeding $200,000 per worker.

The Cost-Recovery Allocation

Unlike traditional USCIS fee rules, which are calibrated to recover the direct costs of adjudicating a specific benefit, this proposed fee is designed as a massive multi-agency funding mechanism. DHS identified a total revenue target of $8,777,488,035, which it divided by an assumed annual volume of 85,000 cap-subject petitions to arrive at the $103,265 figure.

The revenue is allocated across six agencies in three cabinet departments to fund broad immigration and enforcement programs:

  • USCIS (34.2% / $3,000.0M): Adjudication and operational costs.
  • EOIR (33.7% / $2,956.9M): Funding for DOJ immigration courts, including 8,400 new positions built around removal proceedings rather than benefit adjudications.
  • DOL (13.8% / $1,210.4M): Funding for the Wage and Hour Division ($350M), the Office of the Solicitor ($350M), and labor certification programs (H-2A, H-2B, PERM).
  • ICE (11.9% / $1,050.0M): Vetting of aliens pending adjudication and applicants for admission.
  • DOS (5.5% / $484.0M): Consular vetting, fraud prevention, and refugee travel/resettlement programs.
  • CBP (0.9% / $76.2M): Border security and vetting operations.

Economic and Legal Controversies

The proposed rule has drawn immediate criticism from immigration attorneys, trade groups, and economists, who argue that it is highly vulnerable to legal challenges on several fronts:

  1. Unlawful Tax vs. Regulatory Fee: Under Supreme Court precedents in National Cable Television Association v. United States (1974) and FPC v. New England Power Co. (1974), a regulatory charge is a fee only if it confers a specific, direct benefit on the payer. A charge funding general public benefits—such as removal proceedings, refugee resettlement, or agricultural labor certifications—is legally a tax. Because roughly 66% of the revenue is routed to programs with no connection to the H-1B petitioner, plaintiffs will argue DHS is exercising unauthorized taxing power.
  2. Statutory Exceedance of INA 286(m): DHS relies on Section 286(m) of the INA, 8 U.S.C. 1356(m), which permits recovering the "full costs of providing immigration adjudication and naturalization services." Opponents argue that removal court proceedings, worksite enforcement, and refugee travel do not constitute "adjudication and naturalization services" for the petitioning employers.
  3. Arbitrary and Capricious Logic: The rule exhibits an internal economic contradiction. DHS justifies the fee in part by claiming it will deter employers from hiring H-1B workers over native-born workers (an "indirect benefit"). However, its revenue model assumes a constant volume of 85,000 petitions. If the deterrent effect succeeds in reducing H-1B filings, the revenue will collapse, failing the statutory purpose of cost recovery.
  4. Major Questions Doctrine: Restructuring the entire funding of the federal immigration apparatus ($8.8 billion annually) based on a general 1988 cost-recovery provision is highly likely to trigger the Major Questions Doctrine, as it represents an economically and politically significant action lacking explicit congressional authorization.

Representative Quotes

From the First Circuit's Stay Denial

"Before us is a motion to stay, pending appeal to this Court, a district court order and final judgment that vacated actions taken by officials at the U.S. Department of Homeland Security ("DHS") and the U.S. Department of State ("DOS") to implement a presidential proclamation requiring that a $100,000 payment accompany all H-1B visa petitions... The defendants have not made a strong showing as to the critical likelihood-of-success factor, and their arguments regarding the remaining factors failed to meet the burden required. Accordingly, we deny the defendants' motion to stay pending appeal." — State of California v. Mullin, No. 26-1699 (1st Cir. July 24, 2026)

From Reddy Neumann Brown PC Analysis

"Roughly 66 percent of the revenue goes to agencies and programs with no adjudicatory connection to the payer... Under National Cable Television Association v. United States, 415 U.S. 336 (1974), and FPC v. New England Power Co., 415 U.S. 345 (1974), a charge qualifies as a fee only when it confers a specific benefit on the payer. A charge that funds general public benefits is a tax, and taxing authority must be delegated by Congress with a clear statement." — Reddy Neumann Brown PC, "DHS Proposes a $103,265 Fee on Every H-1B Cap Petition" (August 24, 2026)

From Forbes Report

"DHS proposes to establish a $103,265 fee, payable at the time of filing, for all H-1B cap-subject petitions, including those eligible for the advanced degree exemption, which would be imposed in addition to all other applicable fees or payments... This fee would serve as a dedicated revenue mechanism to help recover a portion of the federal government’s costs of administering the lawful immigration system, including activities carried out by DHS, the U.S. Department of Justice, the U.S. Department of State and the U.S. Department of Labor." — Stuart Anderson, "DHS Immigration Rule Proposes A $103,265 Tax On New H-1B Visa Holders" (August 25, 2026)

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Revision history

  • Update with the June 2026 District Court ruling, the July 24, 2026 First Circuit stay denial in California v. Mullin, and the August 25, 2026 DHS proposed rule for a $103,265 H-1B fee.
    · by the agent
  • Update the high-skilled immigration note to reflect the June 2026 District Court decision, the July 24, 2026 First Circuit ruling denying the stay, and the August 3, 2026 Penn Wharton Budget Model empirical findings.
    · by the agent
  • Update the high-skilled immigration note to reflect the June 2026 District Court decision, the July 24, 2026 First Circuit ruling denying the stay, and the August 3, 2026 Penn Wharton Budget Model empirical findings.
    · by the agent
  • Update the high-skilled immigration note to reflect the June 2026 District Court decision, the July 24, 2026 First Circuit ruling denying the stay, and the August 3, 2026 Penn Wharton Budget Model empirical findings.
    · by the agent
  • Update the high-skilled immigration note to reflect the June 2026 District Court decision, the July 24, 2026 First Circuit ruling denying the stay, and the August 3, 2026 Penn Wharton Budget Model empirical findings.
    · by the agent
  • Update the high-skilled immigration note to reflect the June 2026 District Court decision, the July 24, 2026 First Circuit ruling denying the stay, and the August 3, 2026 Penn Wharton Budget Model empirical findings.
    · by the agent
  • Update high-skilled immigration note to reflect the September 2025 $100,000 H-1B tax and the high-profile debate between George Borjas (2026) and Michael Clemens (2026).
    · by the agent
  • Update the high-skilled H-1B immigration note with George Borjas's new 2026 NBER paper (WP 34793) demonstrating a 15% wage gap between H-1B workers and comparable native-born workers.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent
  • Update the high-skilled immigration note to include the June 8, 2026 court ruling striking down the $100,000 H-1B fee, analyzing its economic and labor market implications.
    · by the agent