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How to Know if You are Cap-Exempt From H-1B Lottery

Bridge Team Member

Throughout the year, many companies attempt to sponsor international employees to work on projects, attend conferences, open new offices, or start new research projects in the United States. However, through the immigration system, there are only so many pathways a company can consider, and of those pathways, the most commonly used is the H-1B. 

Attaining an H-1B is undoubtedly still a complex situation, with ~308,000 H-1B registrants for FY 2022, yet 85,000 total spots that means 72% of registrants were rejected before an adjudicator evaluated the application. This is a reported 12% increase in applicants from FY 2021. Annual H-1Bs limits represent 0.05% of the US labor force, despite there being well over 1 million active job vacancy postings in computer occupations according to an NFAP analysis and an unemployment rate of 2.5% in April 2021 in math and computer occupations. So how are companies navigating the immigration system to find desirable technical talent for their teams?

What is the H-1B and why is it so common?

The H-1B program allows companies to temporarily employ international employees in specialty programs that require a bachelor’s degree or higher in the specific specialty. Specialty occupations may include fields such as engineering, computer occupations, mathematics, architecture, medicine and health, physical sciences, etc. The H-1B program is capped at 65,000 visas per year, plus an additional 20,000 visas reserved for individuals with a master’s degree or higher from a US university. 

Some reasons why the H-1B might be commonly pursued are that compared to some of its counterparts like the O-1 visa, or EB-1 visa, the H-1B does not contain as many requirements to be eligible to apply, and the H-1B is also dual intent visa, which gives the holder nonimmigrant privileges and a clear path to a green card if there is a willing sponsor. 

What are alternatives if not selected in the H-1B lottery? 

Despite USCIS opening up a third round of selections for the lottery, being selected is still quite a slim probability. Companies have a couple of options to solve their technical talent needs. An alternative for US companies pursuing work visa sponsorship might be to try alternative visas (like the L-1 visa), a method that might require companies and prospective applicants to prove additional qualifications, but won’t have a lottery cap or as rigid of a timeline. Additionally, companies can try to apply for cap-exemption allowing them to access the H-1B visa and circumvent the lottery system altogether. 

What is Cap-exemption?

To be Cap-exempt means that certain organizations are exempt from the timeframe or limit that governs the 85,000 application cap and can file H-1B applications without going through H-1B cap. 

This exemption category is available to US employers that fall into one of four categories including:

  • Institutions of higher education;
  • Nonprofit related or affiliated nonprofit with an institution of higher education;
  • Nonprofit research organizations,
  • Governmental research organizations; or
  • For-profit employment scenario exemptions. 

How to know if you are a cap-exempt organization?

Institution of Higher Education

The term “institution of higher education” is, in turn, defined as “an educational institution in any State that” meets the following conditions:

  • “[A]dmits as regular students only persons having a certificate of graduation from a school providing secondary education, or the recognized equivalent of such a certificate;
  • “[I]s legally authorized within such State to provide a program of education beyond secondary education;
  • “[P]rovides an educational program for which the institution awards a bachelor’s degree or provides not less than a 2-year program that is acceptable for full credit toward such a degree;
  • “[I]s a public or other nonprofit institution; and
  • “[I]s accredited by a nationally recognized accrediting agency or association, or if not so accredited, is an institution that has been granted preaccreditation status by such an agency or association that has been recognized by the Secretary for the granting of preaccreditation status, and the Secretary has determined that there is satisfactory assurance that the institution will meet the accreditation standards of such an agency or association within a reasonable time."

This definition does not include for-profit institutions of higher education, and thus such entities are subject to the cap.

Nonprofit Related to or Affiliated with Institution of Higher Learning

A nonprofit entity is one that is tax-exempt under section 501(c)(3), (4), or (6) of the Internal Revenue Code (IRC), and “has been approved as a tax-exempt organization for research or educational purposes by the Internal Revenue Service.” 

A nonprofit entity is “related to or affiliated with” an institution of higher learning if one of the following applies:

  • The two entities have shared ownership or control “by the same board or federation”;
  • The nonprofit is operated by the higher education institution; 
  • The nonprofit is “attached to” a higher education institution as a “member, branch, cooperative, or subsidiary”; or
  • The nonprofit has “entered into a formal written affiliation agreement” with the higher education institution that “establishes an active working relationship between” the two entities “for the purposes of research or education, and a fundamental activity of the nonprofit entity is to directly contribute to the research or education mission of the institution of higher education.”

Nonprofit Research Organization 

A nonprofit research organization is defined as “an organization that is primarily engaged in basic research and/or applied research.” These types of research, in turn, are defined respectively as “general research to gain more comprehensive knowledge or understanding of the subject under study, without specific applications in mind,” and “research to gain knowledge or understanding to determine the means by which a specific, recognized need may be met.”


Governmental Research Organization

A governmental research organization “is a federal, state, or local entity whose primary mission is the performance or promotion of basic research and/or applied research.” 


Qualifying for-profit employment scenario  

It is important to note that if a petition is filed by an entity that is not one of the four types eligible for exemption (as laid out above), but the “beneficiary will spend the majority of his or her work time at a qualifying...entity,” the petition may still be exempt from the cap, provided the job duties “directly and predominately further the essential purpose, mission, objectives, or functions of the qualifying…entity.” In other words, the petitioner must show a nexus between the work performed by the H-1B and the purpose or functioning of the qualifying entity.

As an example, companies that have contracts with qualifying federal agencies (or other qualifying institutions) which require the placement of professionals on-site at the particular agency are seen in USCIS guidance as fulfilling the “employed at” scenario. 

The USCIS considers the following factors in deciding whether to allow an employee set to work at a for-profit company to take advantage of the cap-exempt benefits:

  • Whether the petitioner and qualifying institution have a formal affiliation, such as a “cooperative relationship”;
  • Whether the beneficiary’s work will be for the benefit of the qualifying institution rather than the petitioner;
  • Whether the beneficiary’s work is related to the qualifying institution’s purpose or reason for existence; 
  • Whether the beneficiary will physically work at the qualifying institution for a majority of his or her time (a required element in all “employed at” situations);
  • Whether the beneficiary’s duties “would or could otherwise be performed by employees of the qualifying institution”; and/or
  • Whether the beneficiary was previously employed by the qualifying institution in the same capacity as that anticipated for the petitioner.

I think I’m cap-exempt, what are my next steps? 

If you think you are one of the few companies that qualify for cap exemption consider reaching out to a qualified immigration attorney to help you prepare the case. It could help to be prepared with any documentation or evidence you deem relevant to proving cap exemption at that time and the attorney can more quickly help you build out a suitable plan

Other FAQs about Cap-Exemption

How can I identify H-1B cap-exempt employers?

  • You can find databases to match you with a suitable H-1B cap-exempt employer.

Can an H-1B cap-exempt employee transfer to an employer that is subject to cap? 

  • Yes, but because the employee is currently not counted against the H-1B cap, a new employer (assuming they do not qualify for cap-exemption) would need to file a new cap-subject H-1B petition for the employee. It’s important to consider the timing of filing since USCIS only accepts new cap-subject H-1B applications once a year and, if selected and approved, that employee would not be eligible to start working until October 1 when the H-1B fiscal year begins. 

Does premium processing affect cap-exemption at all?

  • Since the March 20th, 2020 temporary suspension and subsequent May 29th, 2020 memo, USCIS has resumed premium processing on all other Form I-129 petitions for all H-1B cap-subject petitions (including those for the fiscal year 2021), including change of status from F-1 nonimmigrant status, for both premium processing upgrades and concurrently files I-907s

What is the processing time for H-1B cap-exempt companies?

  • Cap-exempt petitions function like most other nonimmigrant visas that are not dependent on the H-1B lottery and can range from six months (depending on service center and any RFEs) to 15 calendar days with premium processing. 

Content in this publication is not intended as legal advice, nor should it be relied on as such. For additional information on the issues discussed, consult a Bridge-affiliated partner attorney or another qualified legal professional.


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