The Immigration and Naturalization Service has issued its first regulation implementing provisions of the American Competitiveness and Workplace Improvement Act of 1998, the new H-1B law signed in October. The interim rule implements the new $500 H-1B fee, it establishes guidelines to determine if a sponsoring employer is eligible for an exemption from the fee and it amends the H-1B regulations to reflect the new numerical limits on the issuance of H-1B classification.

The new $500 fee was created to provide a fund for the Department of Labor and the National Science Foundation to enhance "job training, low income scholarships, grants for mathematics, engineering, or science enrichment courses, systematic reform activities and administration and enforcement of the H-1B programs." The INS will get 1.5% of the fee back to help offset their expenses in processing H-1B cases.

The fee went into effect for certain applications filed after December 1, 1998 and will continue for all applications received until September 30, 2001. The fee will be collected for the following three types of cases:

- an initial grant of H-1B status

- an extension of stay for individuals currently in H-1B status (only for the first extension request by an employer)

- authorization for a change in employment for individuals currently in H-1B status

The INS notes that the limit to charging the fee for the first extension request is specific to the employer. So, for example, Employer A files for an extension and pays the fee, the employee switches to Employer B who pays the fee at the time of the filing of the change of status application and then Employer B would again have to pay the fee if it applies for an extension.

Amendment applications do not need to be accompanied by the $500 fee unless they are also requesting an extension.

Employers can pay the normal $110 fee and the special $500 fee in one check (though note that earlier in this issue we report that the Service Centers will accept two checks). The alien H-1B beneficiary may not pay the fee so if the check for the new fee is on the alien's checking account, the INS will reject it.

The following two types of organizations are exempt from the $500 fee:

- institutions of higher education or related or affiliated nonprofit entities and

- nonprofit or governmental research organizations

The INS uses the same definition of "institution of higher education" included in Section 101(a) of the Higher Education Act of 1965. Nonprofit affiliates will include hospitals and medical or research institutions connected or associated with universities through shared ownership, control by the same board or federation operated by a university, or attached to a university as a member, branch, cooperative, or subsidiary.

A "nonprofit or governmental research organization" includes entities primarily engaged in basic research and/or applied research or a US government entity whose primary mission is the performance or promotion of basic research and/or applied research.

Employers exempt from the $500 fee must submit the new Form I-129W with their applications for H-1B workers. Along with the I-129W, the employer must submit proof that it is exempt based on the requirements noted above.

Look for further regulations to come within the next few months on other requirements in the new law like revisions to the Labor Condition Application attestations, new penalties and new rules on prevailing wage calculations.