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Legal Precedent & Regulations

Cap-Exempt H-1Bs & Related Concurrent Employment

This page is intended to serve as a reference outlining and listing the legal rules underpinning The Parachute Project’s (TPP) innovative strategy of functioning as a non-profit, cap-exempt entity in the realm of H-1B visa regulations.

  • Focusing on the nuances of cap-exempt and concurrent H-1B employment rules, established by memorandum and regulation in 2017, this outline is contextualized within the framework of the October 2023 proposed rule impacting H-1B visas rules for cap-exempt organizations.

  • TPP’s approach, which is entrenched in legal precedents and statutory provisions, seeks to clarify the foundations that substantiate our cap-exempt status and operational methodology.


Statutory Basis for Cap-Exempt H-1Bs


Section §214(g)(5) of the Immigration and Nationality Act (INA)

The cornerstone of TPP’s cap-exempt status is rooted in Section §214(g)(5) of the INA1. This statute explicitly excludes certain categories of employers from the annual H-1B visa cap, pivotal for cap-exempt organizations such as TPP. The statute’s language excludes institutions of higher education, non-profit entities affiliated with higher education institutions (where TPP sits), non-profit research organizations, and governmental research organizations. TPP’s alignment with this provision is clear through its collaborative initiatives and partnerships with our partnered institutions of higher education, thereby meeting the statutory criteria for cap exemption.

Legal Citations

INA §214(g)(5) elaborates on the categories of cap-exempt employers and beneficiaries. This section of the Immigration and Nationality Act (INA) specifies the categories of employers and beneficiaries that are exempt from the annual H-1B visa cap.

The regulatory interpretation of this statute is further expanded in 8 CFR §214.2(h)(8)(ii)(F)(2) (Code of Federal Regulations), which provides detailed criteria for determining cap-exempt status2. Particularly relevant to The Parachute Project – a non-profit entity is considered related to or affiliated with an institution of higher education if it meets any one of the following conditions:

  • Formal Written Affiliation Agreement

    The Parachute Project, as a 501(c)(3) non-profit entity has entered into formal written affiliation agreements with several institutions of higher education (nationally recognized and accredited universities, such as Case Western Reserve University). This agreement establishes an active working relationship between the non-profit entity, The Parachute Project, and the educational institution for the purposes of research or education.

  • Contribution to Research or Education Mission

    A fundamental activity of The Parachute Project is to directly contribute to the research or education mission of the institution of higher education. We do this by developing and providing our mentorship platform to universities and their student populations on a gratis basis, with the principal aim of enhancing and furthering the university’s mission and educational objectives.

  • Our Qualifications

    Our organization, through its affiliation with institutions of higher education, fulfills the criteria set out by INA §214(g)(5) and 8 CFR §214.2(h)(8)(ii)(F)(2). We have formal written affiliation agreements that create an active partnership for educational purposes. Additionally, a core component of The Parachute Project’s mission is to directly contribute to the educational and research objectives of these institutions. This involvement ranges from career development to educational program development, thereby integrating our activities with the institutional goals of our higher education partners.

These aspects of our operation and partnership with educational institutions align us squarely with the criteria set forth by INA §214(g)(5) and 8 CFR §214.2(h)(8)(ii)(F)(2), substantiating our status as a cap-exempt employer under H-1B visa regulations.


TPP’s Status Under the Internal Revenue Code

TPP’s classification as a 501(c)(3) non-profit organization under the Internal Revenue Code solidifies our stance as a public service entity committed to educational advancement. This status is instrumental in reinforcing our eligibility for cap-exempt H-1B petitions. Being a 501(c)(3) entity, TPP is inherently aligned with public and quasi-public objectives, with our primary focus on educational efforts. This classification synergizes with the regulatory framework established for cap-exempt H-1B petitions, as stipulated by the USCIS.

Legal Citations

Internal Revenue Code §501(c)(3) outlines the criteria and operational requirements for organizations seeking 501(c)(3) status. This section describes exemptions for corporations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes. 

The alignment of TPP’s objectives with these requirements substantiates our eligibility under this code section. You can click here to read the government regulations for the tax-exempt provisions we base our program on.

​1 This section of the INA establishes the numerical limitations for H-1B visas and outlines exemptions for certain categories of employers and beneficiaries known as “cap-exempt” organizations. Specifically, it states that the numerical limits do not apply to nonimmigrant aliens who are employed at institutions of higher education, nonprofits affiliated with higher educational inspirations, such as TPP, nonprofit research organizations, or governmental research organizations.

​2 This regulation provides detailed criteria for determining the cap-exempt status of H-1B beneficiaries. It expands on the statutory basis provided in INA §214(g)(5) by detailing the specific conditions and requirements for an organization to be considered cap exempt.


Demonstrating Affiliation with University Partners


Nonprofit Affiliation With Higher Education Institutions

TPP’s strategy to establish itself as a cap-exempt entity under H-1B regulations hinges on demonstrating a robust affiliation with higher education institutions. This affiliation is manifested through various collaborative endeavors that directly contribute to the educational missions of these institutions. Our key strategies include:

  • Educational Content Co-Creation

    TPP collaborates with university faculties to develop mentorship and career-focused programs. This initiative not only enriches the curriculum and career centers of the partner universities but also aligns with TPP’s mission of fostering professional development.

  • Co-Branding Initiatives

    TPP and its university partners intend to engage in co-branding efforts, showcasing a united front in educational and research endeavors. This public display of partnership strengthens the perception of a bona fide affiliation.

  • Internship and Employment Opportunities

    Through its professional network, TPP facilitates unique internship and employment opportunities for students and graduates of partner universities. This directly contributes to the career success missions of these institutions.

Legal Framework

The strategies employed by TPP are in line with the USCIS policies and guidelines referenced in the appendix, as well as established case law3, which consider such collaborative efforts as evidence of a qualifying relationship with institutions of higher education for cap-exempt H-1B petitions.

​3 A key case that clarifies the standards for nonprofit affiliation with higher education institutions is the 'Matter of Children’s Hospital, 2011-PER-01338 (BALCA Nov. 15, 2011).' This decision by the Board of Alien Labor Certification Appeals (BALCA) emphasized the necessity of a substantial and active working relationship between a nonprofit entity and an institution of higher education. In this case, the evidence of a joint statement of policies, shared resources, collaborative research initiatives, and public representation of affiliation played a crucial role in establishing the required connection for cap exemption. This precedent is seen as guidance by TPP in demonstrating and substantiating our affiliation with our partnered educational institutions.


Case Law Addressing H-1B Visas and Cap-Exempt Eligibility4


Matter of Simeio Solutions, LLC (2015)

This case serves as a vital precedent for organizations like TPP in terms of compliance with H-1B regulations. The United States Citizenship and Immigration Services (USCIS) clarified the need for filing amended H-1B petitions when there is a material change in employment, including changes in the beneficiary’s work location. As a cap-exempt entity, TPP adheres strictly to these guidelines, ensuring compliance with all regulatory changes. This case law is intended to be formally integrated into immigration regulations via the October 2023 proposed rule.


ITServe Alliance v. Cissna (2018)

This significant ruling impacted IT consulting companies and by extension, all H-1B petitioners, such as cap-exempt organizations like TPP. This case emphasized the scrutiny of USCIS in approving H-1B petitions, particularly those involving third-party worksites. TPP’s model, while distinct, draws lessons from this case in maintaining rigorous adherence to USCIS policies.


Innova Solutions, Inc. v. Baran (2017)

This case highlights the importance of establishing that a beneficiary’s job qualifies as a specialty occupation, especially when third-party worksite placements are involved. TPP’s strategy involves a careful emphasis on job duties and qualifications, for both the cap-exempt as well as the concurrent case, to ensure strict compliance with this criteria.


Defensor v. Meissner (2000)

Defensor v. Meissner serves as a caution against any attempts to circumvent the H-1B cap through inappropriate means. TPP’s approach is grounded in vigilant adherence to legal standards, avoiding any semblance of cap circumvention or misuse of the H-1B program. The government has re-emphasized this position in the latest proposed regulation (October 2023) where it seeks to establish an accessible and more transparent H-1B visa lottery. The Parachute Project welcomes the government’s proposed regulations as it clarifies and further establishes the legitimacy of the cap-exempt H-1B as it relates to nonprofits affiliated with higher education establishments, such as ours.

​4 Brief case summaries provided below in the Appendix.


Applicable U.S. Citizenship and Immigration Services (USCIS) Regulations


Concurrent H-1B Employment Regulations (2017)


Proposed October 2023 H-1B Rule

  • In late 2023, the Department of Homeland Security (DHS) promulgated new rules that significantly changed the H-1B visa program. This rule making is aimed to modernize the H-1B specialty occupation worker program by streamlining eligibility requirements for cap-exempt organizations and employees, improving program efficiency, providing greater benefits and flexibilities, and strengthening integrity measures.

  • These rules expands the definition of employers and H-1B workers exempt from the H-1B quota, revising the definition of an exempt ‘‘nonprofit research organization’’ and ‘‘governmental research organization,’’ and altering criteria for cap exemption eligibility for certain H-1B beneficiaries .Click here to read the specific provisions modernizing cap-exempt eligibility.

  • The rules(click here to see the rule published in the Federal Register) include amendments to the definition of specialty occupation, changes to the regulation for determining whether a position qualifies as a specialty occupation, and codification of policies related to H1B amendments for new work locations and other policies detailed in existing U.S. Department of Labor (DOL) regulations. These changes have been generally followed and accepted by the Agency after establishment of the case law cited above and are now be formally codified into regulations.

​5 While the legal framework permits concurrent H-1B employment, TPP is cognizant of potential challenges. To mitigate these risks, TPP ensures that job positions closely align with Department of Labor standards for specialty occupations and provides clear documentation about the nature and continuity of employment. Our proactive approach in addressing these potential challenges underscores our commitment to compliance and operational integrity.


Related Department of Labor (DOL) Regulations


Prohibition on Beneficiary Payment of Legal and USCIS Filing Fees

Regulatory Mandate: Under 8 C.F.R. § 214.2(h)(4)(iii)(C), the Department of Labor (DOL) strictly requires that employers remain responsible for all costs associated with the preparation and filing of H-1B petitions, which includes legal fees. This regulation is in place to ensure that U.S. workers are not disadvantaged and that H-1B nonimmigrant workers are treated fairly. The specific text of the government regulations, which outline the employer’s liability for certain H-1B visa fees and the prohibition on reimbursement from the beneficiary can be read here.

Legal Precedent

In Patel v. Wargo 803 F.2d 632, the Fourth Circuit Court of Appeals upheld this requirement, demonstrating that transferring these costs to H-1B beneficiaries violates DOL regulations and the Immigration and Nationality Act.


Third-Party Payment of H-1B Legal and USCIS Filing Fees

  • Regulatory Framework: While direct beneficiaries of cap-exempt visas are prohibited from paying these fees, the DOL allows third parties to cover these expenses. However, it is critical that these payments are not reimbursed by the H-1B employee, maintaining the integrity of the H-1B program.

  • Interim Final Rule on H-1B (8 CFR 214.2(h)(2)(i)(G)): This rule clarifies that third parties may pay the H-1B legal and USCIS filing fees as long as there is no reimbursement to the H-1B employee. Here you can read the Interim Final Rule on H-1B (8 CFR 214.2(h)(2)(i)(G)), which clarifies that third parties may pay the H-1B legal and USCIS filing fees as long as there is no reimbursement by the H-1B employee.

  • TPP’s adherence to these DOL regulations underscores our commitment to legal compliance and ethical standards in the H-1B visa program. By ensuring that all legal and filing fees are appropriately managed, TPP maintains its integrity as a cap-exempt H-1B sponsor.


TPP’s cap-exempt, concurrent employment model is meticulously crafted to align with the legal frameworks established under the INA.

TPP’s cap-exempt, concurrent employment model is meticulously crafted to align with the legal frameworks established under the INA. Through strategic affiliations with higher education institutions and strict adherence to USCIS guidelines, TPP holds a strong position as a cap-exempt H-1B sponsor. Our organization's commitment to compliance and transparency is a key component of our innovative approach, offering compliant and effective means for employing foreign nationals under the H-1B program.


Brief Summaries of Relevant Case Law


Matter of Simeio Solutions, LLC (2015)

This decision by the Administrative Appeals Office (AAO) clarifies the requirement for H-1B petitioners to file an amended petition when there is a material change in the terms and conditions of employment, including a change in the place of employment.


ITServe Alliance v. Cissna (2018)

This case challenged certain USCIS policies regarding the approval of H-1B petitions, especially those involving third-party worksites.


Innova Solutions, Inc. v. Baran (2017)

This case set a clear standard and required criteria for establishing a job as a specialty occupation for H-1B visa purposes, particularly in third-party worksite scenarios. Adhering to these criteria ensures that TPP can effectively sponsor H-1B visas for positions that truly qualify as specialty occupations, thereby maintaining regulatory compliance and supporting our mission effectively.


Defensor v. Meissner (2000)

This case addressed the issues with filing multiple H-1B petitions as a means to circumvent the annual visa cap. It highlighted the strict regulatory stance against any attempts to exploit the H-1B visa system. The government has reemphasized this position in the latest proposed regulation (October 2023) where it seeks to establish a fair lottery system.


Patel v. Wargo (1986)

In this case, the court examined the employer-employee relationship under the Fair Labor Standards Act (FLSA). This case underscores why an employer, and not the employee, must pay certain employment-related fees, such as H-1B filing fees. For TPP, this emphasizes our adherence to legal standards in employment practices, ensuring compliance with federal labor laws relating to the financial aspects of employment.

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