The U.S. 2013 Immigration Reform Act- Impact on Foreign Nationals and Foreign Investment

Practice Areas

On June 27, 2013, by a 68-32 vote, the U.S. Senate passed S. 744, the Border Security, Economic Opportunity, and Immigration Modernization Act, the so-called "2013 Immigration Reform Act", hereinafter, "the Act". Right now, the Act is pending at the U.S House of Representatives for consideration. However, passing this Act by U.S. Senate is already a historical bipartisan effort in US immigration reform history. The Act significantly increases the number of non-U.S. citizens who could lawfully enter and work in the U.S. temporarily or permanently. It also creates a process for many illegal immigrants in U.S. to gain legal status when certain conditions being met. In addition, it also targets to attract more foreign investment and investors.

Impact on Foreigners Working in Specialty Occupations

The H-1B visa allows U.S. employers to temporarily employ foreign workers in a specialty occupation which requires highly specialized knowledge in a field of human endeavor. The foreign worker has to have at least a related Bachelor degree. According to Bloomberg, Indians and Chinese are top two beneficiaries of H-1B Visa. Indian uses 53.52% of H-1B visa and Chinese use 9.12%.  Most IT positions – Software Engineer, Programmer, System Analyst – are classified by U.S Department of Labor as specialty occupations.  Currently, there is an annual cap of 65,000 for H-1 B visas, and another 20,000 for those who earned a Masters or PhD in the U.S.  Due to the high demand, the quota finishes up rapidly every year, sometimes as quickly as in one week as it did in April, 2013.

The proposed Act raises the base H-1B cap to 115,000 and the advanced degree holders from U.S. institutions to 25,000. The advanced degree must be in science, technology, engineering, and mathematics (STEM) field. It also provides spouse of H-1B workers with work authorizations if the same reciprocal treatment is given by the H-1B worker's home country to U.S. workers in that country. Unfortunately, right now, India and China do not have such reciprocal treatment. So the H-1B workers' spouses from these two countries are still not eligible for work authorization. Spouse of H-1B worker from United Kingdom and certain European countries are eligible. Also, according to the current immigration law, in most situation, once the H-1B worker lose the job for any reason, he is out of status immediately and needs to leave the U.S. The Act establishes a 60 days Grace Period for H-1B worker whose employment is terminated before the expiration of the worker's period of authorized admission. Such workers can files a petition to extend, change, or adjust their status at any point during the Grace Period and will be deemed to have lawful status while the petition is pending.

 

Impact on Legal Immigrants Seeking Permanent Resident Status (Green Card)

 

In order to stay and work in U.S permanently, all legally entered foreign nationals will need to apply for permanent resident status through family based or employment based Green Card application process. The current U.S. immigration law has an annual limit on immigrant number both in family based immigration process or employment based immigration process. It also set up a per-country limit for preference immigrants which is 7% of the total annual family-based and employment-based preference limit. In FY 2013m this number is 26,913 and the dependent (spouse and children) area limit is set at 2%, or 7,689.

According to a report published by Office of Immigration Statistics, in 2012, there were a total of 1,031,631 persons who became LPRs of the United States. Nearly 66 % of new LPRs got permanent residency based on a family relationship with a U.S. citizen or permanent resident. The leading regions of birth of new LPRs in 2012 were Asia (42%) and North America (32%). The four leading countries of birth of new LPRs were Mexico (14%), China (7.9%), India (6.4%), Philippines (5.6%). Due to the per-country limit, there is always backlog/visa retrogression in family based green card application for immigrants who were born in Mexico and Philippines; and in employment based green card application for immigrants who were born in India and China.

The Act proposes to eliminate the backlog by exempting the following categories from the annual numerical limits on employment-based immigrants: derivative beneficiaries of employment-based immigrants; aliens of extraordinary ability in the sciences, arts, education, business or athletics; outstanding professors and researchers; multinational executives and managers; doctoral degree holders in STEM field; and physicians who have completed the foreign residency requirements.

It also allocates 40 percent of the worldwide level of employment-based visas to : 1) members of the professions holding advanced degrees or their equivalent whose services are sought in the sciences, arts, professions, or business by an employer in the U.S. (including certain aliens with foreign medical degrees) and 2) aliens who have earned a master’s degree or higher in a STEM field from an accredited U.S. institution of higher education and have an offer of employment in a related field and the qualifying degree was earned in the five years immediately before the petition was filed.

For family-based immigrants, the Act also raises per-country limit from 7% to 15%. It raises caps for different family preferences: for example, unmarried sons and daughters (21 or over) of U.S. citizens (from 23,400 to 56,350), married sons and daughters (21 or over, under age 31 at the time of filing) of U.S. citizens (from 23,400 to 40,250); unmarried sons and daughters of LPRs (from 26,266 to 64,400). It also reclassify the spouse and minor children (under 21) of Permanent resident as immediate relatives, and not subject to immigrant visa cap though it eliminates diversity visa program (green card lottery) and 4th preference (sibling of U.S citizen)

Impact on Illegal Immigrants

There are around 11 million illegal immigrants in U.S. The Act creates a Registered Provisional Immigrant (RPI) Status for qualified illegal immigrants who were present in U.S on or before December 31, 2011, and has been continuously physically present in U.S. until date granted RPI status. In order to be qualified, they will need to have relatively clean criminal record, has satisfied any applicable federal tax liability, clears national security and law enforcement reviews, and meets other conditions. Such visa is valid for 6 years and renewable.

There are also special provisions for DREAM Act legalization. DREAM Act is for illegal immigrant's children first apply to be protected from deportation and then apply for and receive lawful permanent residency if they meet certain conditions. These children are usually called DREAMers. On June 15, 2012, President Obama announced Deferred Action for Childhood Arrivals (DACA) program that his administration would stop deporting young illegal aliens who match certain criteria previously proposed under the DREAM ACT. According to the USCIS (U.S. Citizenship and Immigration Services), from August 2012 to February 2013, 199,460 DACA applications were submitted. Mexico is the top one country of origin of these DEARMer applicants, and South Korea lists as number six.  Partially because of this reason, in the following U.S. Presidential election, 71% latinos voted for President Obama and helped him win in key battleground states.

Impact on Foreign Investments With Three Major Changes

First, the Act creates a new Startup or INVEST visa (“Investing in New Venture, Entrepreneurial Startups, and Technologies”). This will allow foreign entrepreneurs who attract a threshold level of financing from U.S. investors or revenue from U.S. customers to build their businesses in the U.S. by creating both temporary visa and permanent green card options for them. If their companies continue to succeed and create jobs for U.S. workers, these entrepreneurs would be eligible for permanent resident status, and eventually U.S. citizenship.

In a 2012 report, the Partnership for a New American Economy found that in 2011, immigrants started 28 percent of all new U.S. businesses, despite accounting for only 12.9% of the U.S. population. In US, the immigrant entrepreneurs started one of every four small business and high-tech startups across the nation. More than 405 of Fortune 500 companies-from GE, Ford to Google and Yahoo! were founded by immigrants or the children of immigrants.

Second, the Act makes EB-5 immigrant investor program permanent. EB-5 visa program was created by U.S. Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. 10,000 visas are yearly granted to qualified investors and their immediate family members who invest $1,000,000 in a new commercial enterprise and create at least ten full-time U.S. workers. The investment need only be $500,000 if done in a “targeted employment area” defined as a rural area or one which has experienced an average unemployment rate of at least 150% of the national average rate. Under a pilot immigration program created in 1992 and regularly extended since, certain EB-5 visas also are set aside for investors in Regional Centers designated by USCIS based on proposals for promoting economic growth. The Act will increase the number of immigrant investor visas available each year through the aforementioned reforms to the employment-based immigration system. It is estimated that the exemption for spouses and dependents on the worldwide cap will result in approximately 14,000 green cards being available each year for individual immigrant investors.

 

According to a White House report, EB-5 investments have been responsible for the infusion of at least $6.8 billion of capital into the United States and the creation of at least 48,950 jobs for U.S. workers as of the end of fiscal year 2012. The reforms in the will attract more foreign investment to the U.S. that will catalyze economic development and create jobs. It has the potential to support more than 140, 000 jobs for U.S. workers each year.

The third change is the new restriction on temporary working visas like H-1B and L and it could negatively impact foreign (especially Indian) companies' investments in consulting industries. Among others, it requires the employers first recruit U.S. workers before hiring foreign workers on H-1B visas. It also requires H-1B dependent employers to pay significantly higher filing fees. In addition, it strengthens prohibitions against displacing U.S. workers, outplacement and outsourcing, and overall requires that employers pay higher wages to temporary H-1B workers, which helps to prevent U.S workers from being undercut by cheaper labor. The U.S. Department of Labor (DOL) would also set up new procedure and new mechanism to detect and punish employers who fail to comply with the law.  

According to DOL, among top ten H-1B employers, there are four Indian companies, including Wipro, Infosys, TCS, and Mphasis. According to Indian National Association of Software and Services Companies (NASSCOM), India will export as much as $87 billion of IT services in the year ending March 2014. Infosys, for example, gets about 60 percent of its revenue from the U.S. The Act will overall affect such foreign investments in IT and other consulting industry.

The Future of the Act and U.S. Immigration Reform  

Currently, both Republicans and Democrats agree that U.S. immigration system is broken and needs to be fixed. However, they took very different approaches to solving this complex issue. The Senate in which the Democrat takes majority seats decided to pass a massive immigration reform act that address all aspect of immigration reform. The House which is dominated by Republican is more conservative and against overall immigration reform. In August, House committee on the Judiciary which is chaired by Bob Goodlatte (R-VA), released "Immigration Resource Kit", calling for Republicans not to pass the Senate Bill, instead, work on individual bill addressing issues in specific field. Right now, the Congress is in recess. It is estimated that the House may take some action on the Act after October. However, no matter what, the reform of U.S. immigration system is carried out. Both Republicans and Democrats are under the pressure to boost economic output, attract more voting shares from rapidly growing immigrant population. Therefore, in a long run, the U.S. immigration policy will become more pro-immigrant.  

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