A U.S. Department Of Homeland Security sign is displayed in Washington, D.C. The Trump administration is proposing a $103,265 tax on all petitions subject to the H-1B annual limit in a new immigration rule. (Photo by Kevin Carter/Getty Images)Getty ImagesThe Trump administration is proposing a $103,265 tax on all petitions subject to the H-1B annual limit. The proposed immigration rule is the latest effort by Trump officials to prevent employers from hiring high-skilled foreign nationals in the United States. A presidential proclamation in Sept. 2025 imposed a $100,000 fee on the entry of new H-1B visa holders. In June, a federal judge struck down the fee, calling it an intrusion on Congress’s taxing authority.The administration is attempting to justify the new rule under a novel theory: DHS has the authority to tax new H-1B visa holders to fund immigration services in several government agencies. In doing so, attorneys say it may be on shaky grounds. A preliminary National Foundation for American Policy analysis finds DHS uses questionable assumptions to claim the $103,265 in higher costs will not significantly reduce H-1B petitions.The Trump administration stated the purpose of the Sept. 2025 $100,000 H-1B fee was to restrict the admission of H-1B visa holders. The presidential proclamation provided a lengthy discussion of why Trump officials thought admitting H-1B visa holders was harmful. After a federal judge struck down that fee as an unlawful tax, the administration has proposed to overcome the ruling with a broader tax and by asserting that the purpose is no longer to restrict H-1B entry but to fund immigration-related functions across the U.S. government.H-1B temporary visas are often the only way for high-skilled foreign nationals to work in the United States long term. Employers must pay the higher of the actual or prevailing wage paid to U.S. professionals with similar experience and qualifications. A proposed rule may price many H-1B visa holders and employment-based immigrants out of the U.S. labor market by changing prevailing wage levels. Another upcoming rule may introduce additional H-1B restrictions. Companies recruiting at U.S. universities find that international students account for approximately 75% to 80% of full-time graduate students in AI-related fields, such as computer and information sciences. An Immigration Rule To Tax New H-1B Visa HoldersThe Department of Homeland Security will impose a new $103,265 tax on all H-1B visa holders subject to the annual H-1B limit, including individuals with advanced degrees qualifying for the 20,000-exemption from the 65,000 annual limit. The new tax would not apply to universities and nonprofit and government research institutions. However, if the H-1B visa holder is outside the United States and the $100,000 tax from the Sept. 2025 proclamation is later ruled lawful, an employer would need to pay both taxes, totaling over $200,000 for a single employee.MORE FOR YOU“The Department of Homeland Security proposes to establish a $103,265 fee, payable at the time of filing, for all H-1B cap-subject petitions, including those eligible for the advanced degree exemption, which would be imposed in addition to all other applicable fees or payments,” according to the proposed rule. “This fee would serve as a dedicated revenue mechanism to help recover a portion of the federal government’s costs of administering the lawful immigration system, including activities carried out by DHS, the U.S. Department of Justice, the U.S. Department of State and the U.S. Department of Labor.”According to DHS, “The new fee is designed, consistent with section 286(m) of the Immigration and Nationality Act, 8 U.S.C. 1356(m), to recover a portion of the full costs of providing immigration adjudication and naturalization services incurred by multiple Federal agencies.”In a June interview, after the federal district court struck down the $100,000 fee as a tax, Jonathan Wasden of Wasden Law said he believed the administration may try new legal grounds to justify the fee. He turned out to be correct.“The new fee is allegedly authorized by Section 1356(m),” said Wasden in an interview about the proposed rule. That section states, “That fees for providing adjudication and naturalization services may be set at a level that will ensure recovery of the full costs of providing all such services, including the costs of similar services provided without charge to asylum applicants or other immigrants. Such fees may also be set at a level that will recover any additional costs associated with the administration of the fees collected.”“Two problems here for the government,” said Wasden. “The massive increase is wholly detached from any fee analysis or explanation of cost recovery. The other problem is that from recent FOIAs we have performed, USCIS is sitting on a mountain of unused cash from fees paid for immigration processing. The agency is already overly funded, and this increased fee cannot be characterized as a recoupment.”“Changing the legal authority does not eliminate the underlying challenge,” said Jeff Robins, a senior counsel at BAL, in an interview. “Opponents will argue that this still looks less like paying for an H-1B adjudication and more like using a tax to finance broader government operations. Combined with ongoing USCIS backlogs and questions about how existing fee revenue is being used, that argument is likely to feature prominently both in public comments and in any lawsuit challenging a final rule.”In June, U.S. District Court Judge Leo T. Sorokin, in the District of Massachusetts, agreed with a coalition of 20 states, led by California Attorney General Rob Bonta, and supported the plaintiffs’ motion for summary judgment against the administration’s $100,000 fee imposed on the entry of new H-1B visa holders. He declared, “The Policy implementing the Proclamation is declared unlawful and is vacated in its entirety.”Judge Sorokin said the case raised significant constitutional separation-of-powers issues. “Plaintiffs allege both that the Policy exceeds the scope of the President’s authority under the Immigration and Nationality Act, and that it encroaches upon Congress’s exclusive power to tax under the Constitution,” he wrote. “Thus, Plaintiffs do not simply claim that the Executive Branch failed to comply with the terms of the INA. Their allegations implicate weighty constitutional concerns regarding the balance of power between the executive and legislative branches.”The judge said the plaintiffs’ argument that the president lacked the power to impose an additional $100,000 payment on H-1B applications intruded on Congress’s taxing power fell “plainly” within the scope of judicial review. According to the judge, “The Supreme Court’s reasoning in this pair of precedents supports a finding that the $100,000 payment requirement amounts to a tax, not a penalty.” The two Supreme Court precedents are Bailey v. Drexel Furniture Company and National Federation of Independent Business v. Sebelius. In July, the U.S. Court of Appeals for the First Circuit rejected the Trump administration’s motion to stay Judge Sorokin’s decision. The Trump administration has appealed.The Justifications For The Immigration RuleDHS argues in the proposed rule that imposing a tax on H-1B cap cases is the correct policy. “DHS considered recovering the costs identified in this rule by applying it to all benefit requests, however . . . DHS is not proposing to recover the costs by imposing an additional fee on all benefit requestors, or all I-129 petitioners, because DHS believes that H-1B cap-subject petitioners, as compared to other benefit requestors, are most willing and able to pay an additional fee.” (Emphasis added.)Attorneys may point out in court that DHS has been selective about justifying fees based on an ability to pay. Under a proposed rule published in June 2026, the fee to apply online for naturalization will increase by 75%, from $710 to $1,280, and by 80%, from $760 to $1,330, for a paper filing. The proposed rule ends hardship waivers and reduced fees for low-income applicants. Analysts point out that the proposed rule justifies the tax, in part, by claiming it is needed to provide more money to Immigration and Customs Enforcement, even though Congress appropriated approximately $75 billion for ICE in 2025 and $39 billion in 2026.DHS attempted to minimize the controversial justification for its proposed rule: “DHS recognizes that the other agency costs that are included in this rule and used to establish the fee proposed in this rule are new. DHS also recognizes that DOS and DOL have not independently used the authority in section 286(m) of the INA, 8 U.S.C. 1356(m), to establish fees to cover the costs they incur for administering adjudication services.” The justification: “However, in 2024, for the first time, DHS established a new Asylum Program Fee of $600 to be paid to fund the asylum program by any petitioner filing a Petition for a Nonimmigrant Worker, Form I-129, a Petition for a CNMI-Only Nonimmigrant Transitional Worker, Form I-129CW, or an Immigrant Petition for Alien Worker, Form I-140. See 8 CFR 106.2(c)(13); 2024 Final Rule. Before that fee, DHS had never directly transferred the costs of one program to another.” (Section 1356(m) of the Immigration and Nationality Act lists “including the costs of similar services provided without charge to asylum applicants,” but spreading fee money throughout the federal government is not mentioned in the INA.)The new $103,265 tax would not replace other employer costs. “The proposed fee, when required, would be in addition to any other applicable fees or payments, including any separate payment obligation required under a Presidential Proclamation,” notes the proposed rule’s executive summary. “Accordingly, to the extent a petitioner is subject both to a proclamation-required payment and to the additional H-1B fee proposed in this rule, the petitioner would be required to pay both amounts.”Universities and nonprofit and government research institutions would not be required to pay the new tax for H-1B petitions in the United States. The $100,000 fee from the H-1B presidential proclamation applied to universities and the research institutions. “DHS is proposing to not require the fee to be paid with a petition for a cap-exempt H-1B nonimmigrant. That is because many cap-exempt H-1B nonimmigrants are employed by nonprofit research organizations, governmental research organizations and educational institutions, and DHS has decided that exempting those organizations is consistent with the application of the asylum program fee on such petitioners.”A person runs past Dunster House at Harvard University on March 17, 2025 in Cambridge, Massachusetts. (Photo by Scott Eisen/Getty Images)Getty ImagesPreliminary Analysis Finds Immigration Rule Reaches Suspect ConclusionsDHS claims a higher cost of $103,265 would not significantly reduce new H-1B petitions. A preliminary analysis by the National Foundation for American Policy found that the DHS assumptions used to support that claim call into question the legitimacy of the proposed rule. First, to support its case, DHS cites an analysis of a 2024 fee increase of less than $1,000 on H-1B petitions, which likely has little relevance to measuring the impact of a fee increase that is 100 times larger. DHS provides only limited information on its analysis of the effect of fee changes on H-1B requests from FY 2021 to FY 2025. “DHS produced neither an exact estimate nor an estimate of its standard error,” said Mark Regets, a labor economist and NFAP senior fellow, in an interview. “It is highly unlikely that any price elasticity will be valid for a change more than 100 times greater. DHS only states that the price elasticity is less than one, meaning that the percentage decrease in applications will be less than the percentage increase in the fee. But there are vastly different implications if the estimate is 0.99 or 0.01, which is the difference between a tiny drop in applications or a decline as large as the increase in fees.” The $103,265 tax likely will be prohibitive for most employers. NFAP found over half of H-1B approvals for initial employment in FY 2025 went to employers with 15 or fewer approved petitions. Sixty-one percent of H-1B employers in FY 2025 had only one approved petition. That makes it likely DHS would exclude many employers in its year-to-year look at the effects of fee changes on H-1B requests. David Bier of the Cato Institute notes H-1B visa holders can leave their jobs in their first year, and that more than 1 million have changed employers over the past few decades. Employers are leery of high out-of-pocket costs for new employees. In its discussion of the proposed rule, DHS also points to a January 2024 Regulatory Impact Analysis of fee changes on I-129, I-140 and N-400 forms. DHS links to a spreadsheet for its impact analysis, but it shows what many analysts would consider peculiar results: higher fees lead to more applications. NFAP found DHS’s estimated effects in the 2024 report it cites to support the new $103,265 H-1B tax go in the wrong direction. The DHS regression suggests that increasing fees leads to increased applications:- Every $1 increase in I-129 fees leads to 1,031 more applications a year.- Every $1 increase in I-140 fees leads to 99 more applications a year.- Using four different models, every $1 increase in N-400 fees leads to between 219 and 638 more applications a year. Regets points out that other administration policies are also likely to reduce H-1B applications. These include new restrictions on international students, an upcoming $100,000 fee on Optional Practical Training and various visa bans that affect the desirability of the United States as a place to build a career.The DHS proposed rule does not attempt to quantify the significant damage it will likely inflict on the U.S. economy and on American companies' ability to innovate and compete in global markets. “Immigrants have founded or cofounded 59% (455 of 775) of America’s privately held startup companies valued at $1 billion or more,” according to a National Foundation for American Policy analysis. (I authored the study.) The collective value of the 455 immigrant-founded billion-dollar companies is $5 trillion, larger than the total market value of companies listed on stock markets in all but 7 countries. DHS Cites A Disputed Immigration Paper DHS engages in what many would consider circular logic, arguing the tax would provide the revenue it projects so long as those subject to the tax do not change their behavior in response to the tax. “DHS anticipates this proposed fee would generate the necessary revenue provided filing volumes do not fall short of those projected herein,” according to DHS. “DHS acknowledges that USCIS may see a reduction in the number of H-1B cap registrations and some employers, including small entities, may file fewer petitions as a result of this proposed rule.”DHS appears to argue that because the proposed rule “depends” on “H-1B petitions not falling short of those projected herein,” that must be what will occur. According to DHS, “However, the success of the USCIS fee model and this rulemaking in generating the necessary revenue depends on the filing volumes of cap-subject H-1B petitions not falling short of those projected herein.”Trump officials ignore research showing employers have responded to past H-1B restrictions by increasing their hiring abroad. Research by Britta Glennon, an assistant professor at the Wharton School of Business at the University of Pennsylvania, concluded that new immigration restrictions on H-1B visas will push jobs out of the United States: “[A]ny policies that are motivated by concerns about the loss of native jobs should consider that policies aimed at reducing immigration have the unintended consequence of encouraging firms to offshore jobs abroad.”Another way DHS attempts to justify the rule is by citing a paper that economists have found deeply flawed. Harvard University economist George Borjas, who served in the Trump administration’s Council of Economic Advisers, wrote in a paper published in February, “On average, H-1B workers earn 16% less than comparable natives, suggesting that firms may be willing to pay a one-time fee to obtain the visa.” Borjas asserts that because his findings show companies save money on H-1B salaries, they should be willing to pay a $100,000 fee to petition for an H-1B visa holder. However, many studies have found that H-1B visa holders are paid the same as or more than comparable U.S. professionals.The findings in the Borjas paper are considered implausible for several reasons. A National Foundation for American Policy analysis found the first red flag in Table 4 of the paper. The table asserts that after controlling for age, education and geography, U.S.-born software developers earn $39,300 more than H-1B software developers ($146,900 vs. $107,600). If companies routinely underpaid H-1B visa holders by almost $40,000 a year, as the Borjas paper implies, DOL should find potentially thousands of willful violations annually. That is not the case. The Department of Labor identified only two new willful violators during the first year of the Trump administration as of October 2025. (See the complaint filed in Global Nurse Force v. Trump.) A second red flag appears in how the Borjas paper measures compensation. The data source Borjas uses for H-1B salaries includes only the starting salary at the firm. In contrast, the Census data the paper uses for U.S.-born workers includes not only salary but also bonuses, commissions and even earnings from second or third jobs.A paper by George Mason University economist Michael Clemens concluded H-1B visa holders earn, on average, 6% more than comparable U.S.-born professionals “when using equivalent wage concepts and comparing workers of the same age, gender, education, and tenure, in the same occupation and local labor market.” He reexamined the data and concluded that the Borjas “estimate suffers from substantial bias.” Clemens writes, “By closely replicating and then revising his analysis, I trace the entire discrepancy to four choices, each of which inflates his estimate.”First, Clemens finds “an undisclosed and erroneous imputation of missing education levels for more than a third of H-1B workers in FY2023 and 2024.” Second, he found Borjas compared “four years of H-1B data (FY2021–2024) against a single year of U.S. native data (2023), for no stated reason, rather than straightforwardly comparing within the same years.” Third, Borjas made a “unique decision to define local labor markets as Census Public Use Microdata Areas—units so small that (e.g.) metro New York City alone is split into 153 unconnected ‘markets,’ with H-1B workers assumed to compete only with natives whose residence lies in the handful of narrow neighborhoods where H-1B worksites are concentrated.” Clemens notes that this method ignores U.S.-born workers who commute, even for short distances. Fourth, Borjas fails to “consider that comparable U.S. natives have over six years of tenure on average, and commensurately higher wages for this reason alone . . . but almost no new H-1B employees have such tenure at the sponsoring firm.” NFAP noted, as did Clemens, that most H-1B visa holders have little or no tenure with the employer that petitions them for H-1B status.Clemens writes that while the point estimate of H-1B visa holders earning 6% more than comparable U.S.-born professionals contains “uncertainty,” he does not find evidence that admits “a wage penalty of any magnitude” for H-1Bs.A paper by Jiaxin He and Adam Ozimek for the Economic Innovation Group reaches similar conclusions to Clemens. He and Ozimek conclude that the findings in the Borjas paper “result from substantial data errors.” A study by economists Giovanni Peri, Kevin Shih, Chad Sparber and Angie Marek Zeitlin found that denying entry to H-1B visa holders due to the H-1B annual limits inhibited job growth for U.S.-born professionals. “The number of jobs for U.S.-born workers in computer-related industries would have grown at least 55% faster between 2005-2006 and 2009-2010, if not for the denial of so many applications in the recent H-1B visa lotteries,” concluded the economists.A National Foundation for American Policy study by University of North Florida economist Madeline Zavodny found, “H-1B visa holders do not adversely affect U.S. workers. On the contrary, the evidence points to the presence of H-1B visa holders being associated with lower unemployment rates and faster earnings growth among college graduates, including recent college graduates.” The proposed immigration rule has a 30-day comment period. Litigation over the rule is expected.