On March 16, 2011, the U.S. Citizenship and Immigration Services (“USCIS”) issued a memorandum addressing the exemption of certain tax-exempt entities from the annual quota on H-1B petitions, known as the “H-1B cap.”  Under current immigration law, non-profit entities that are related to or affiliated with an institution of higher education are exempt from the H-1B cap, meaning that they can obtain approvals of H-1B petitions even if the annual quota on H-1B petitions has been reached.  This exemption has proved particularly useful for hospitals seeking to employ foreign physicians and for many residency programs.

Until recently, the USCIS routinely approved cap-exempt H-1B petitions filed by hospitals based on contractual affiliations with institutions of higher education, such as agreements to provide training to medical students or residents.  However, in early 2011, the USCIS began denying petitions that were filed as cap-exempt unless the petitioner could show a direct ownership relationship between it and an educational institution.  Most hospitals could not meet this requirement.

In the March 16 memo, the USCIS stated that it is currently reviewing its policy on H-1B cap exemptions for non-profit entities that are related to or affiliated with an institution of higher education.  In the meantime, entities that have received approvals of H-1B petitions on a cap-exempt basis since June 6, 2006, will continue to be treated as cap-exempt absent a significant change in circumstances or clear error in the prior adjudication.  The USCIS stressed that these are only interim measures, but also indicated that it will engage the public in developing any future guidance.

A copy of the USCIS memorandum can be found here.