Not long ago my office filed what my legal assistant called the easiest I-140 she had ever prepared. The employer was an ordinary service business with more than a million dollars in revenue. The worker was already on the payroll, already earning more than the wage on the labor certification, and the company’s tax return showed far more cash on hand than the job would ever cost. The ability-to-pay section of that petition took about five minutes, and there is nothing in it for an officer to question.
I open with that case because almost everything written about “ability to pay” makes it sound hard, and for most employers it is not. USCIS runs three simple tests, and an employer that passes any one of them for every year that matters is done. This page explains the three tests, the arithmetic that people get wrong, which years count, which documents USCIS actually reads, and what happens in the harder case where the company lost money. If you are a worker wondering whether your employer can sponsor you, or an employer wondering whether you can afford to sponsor someone, you should be able to answer that question for yourself by the end of the page.
What does “ability to pay” mean, and why does USCIS care?
Ability to pay is USCIS’s way of asking whether the job offer is real. When an employer sponsors a worker for an employment-based green card, the employer promises to pay a specific wage, called the proffered wage: the wage offered on the PERM labor certification, which must be at least the prevailing wage the Department of Labor determined. The I-140 immigrant petition is where USCIS checks that the employer can keep that promise. The regulation, 8 C.F.R. § 204.5(g)(2), requires every employment-based petition that involves a job offer to be accompanied by evidence that the employer “has the ability to pay the proffered wage,” and says the employer “must demonstrate this ability at the time the priority date is established and continuing until the beneficiary obtains lawful permanent residence.”
Two things in that sentence do most of the work. First, the test is about the wage on the labor certification, not the wage the worker actually earns today. If the certified wage is $52,000 and the worker is currently paid $45,000, the number that matters is $52,000. Our guide to the prevailing wage determination explains where that figure comes from and why it is worth getting right before recruitment starts. Second, the obligation runs from the priority date, which for a PERM case is the day the Department of Labor accepted the labor certification application for processing, all the way until the worker becomes a permanent resident. That can be a span of several years, and each of those years has to be covered.
The rule applies to every employment-based category that requires a job offer: EB-2 advanced-degree professionals and people of exceptional ability, EB-3 skilled workers and professionals, EB-3 “other workers,” outstanding professors and researchers, and multinational managers and executives. It does not apply to a self-petitioned EB-2 national interest waiver, because there is no job offer to test. The full list is in the USCIS Policy Manual, Volume 6, Part E, Chapter 4, which is the agency’s own instruction to its officers and the source for most of what follows.
What are the three tests?
An employer proves ability to pay by satisfying any one of three tests, for each year from the priority date forward. Passing one is enough; there is no requirement to pass all three.
Test one: wages already paid to the worker. If the employer has been paying the sponsored worker at least the proffered wage during the relevant years, the proof is the worker’s own W-2 forms, 1099 forms, or state wage reports that list the worker by name. This is the test USCIS trusts most, because it shows the wage being paid rather than the capacity to pay it. Payments that are not wages, such as health insurance premiums or a housing allowance, do not count toward the proffered wage unless the housing was written into the labor certification and advertised with it.
Test two: net income. If the company’s net income for the year, meaning revenue minus all expenses as shown on its federal tax return, equals or exceeds the proffered wage, the company passes for that year. Put in plain terms, the Policy Manual says that USCIS uses the net income figure as the return reports it and does not add depreciation back in. Depreciation is a real deduction that reduces the number USCIS reads, and there is no adjustment for it.
Test three: net current assets. If the company’s current assets minus its current liabilities, as of the end of the tax year, equal or exceed the proffered wage, the company passes for that year. Current assets are the things a business can turn into cash within about a year: cash, marketable securities, inventory, and prepaid expenses. Current liabilities are the debts due within about a year: accounts payable, short-term notes, and accrued expenses. Both figures come from the balance sheet schedule of the tax return. USCIS does not use total assets, because total assets include buildings and equipment that cannot be converted to cash to meet payroll.
Here is the five-minute check the easy case passes. Take the proffered wage from the labor certification. Look at the sponsored worker’s W-2 for the year: at or above the wage, test one is met. If not, look at the net income line of the company’s return: at or above the wage, test two is met. If not, subtract current liabilities from current assets on the balance sheet schedule: at or above the wage, test three is met. An established, profitable business will usually pass at least one of those on the first try, and the whole ability-to-pay section of the petition consists of the tax return and a short cover paragraph pointing at the number.
Does the employer have to cover the whole wage, or only the shortfall?
Only the shortfall. This is the single most useful rule in the chapter and the one that turns many marginal cases into easy ones. If the employer has paid the worker something during the year but less than the proffered wage, the employer only has to show net income or net current assets equal to the difference. The Policy Manual’s own example uses a proffered wage of $50,000 and a worker who was paid $40,000: the employer passes if its return shows either net income or net current assets of at least $10,000 for that year.
The practical consequence is that putting the sponsored worker on the payroll, even part-time and even below the certified wage, changes the arithmetic immediately. A company that would have to show $60,000 of net income to sponsor someone it is not yet employing may only have to show $20,000 once it employs that person at $40,000. It also starts generating the W-2 evidence that USCIS credits above everything else. For a worker who already has work authorization, this is often the first thing worth discussing with the employer, well before anything is filed.
Which years does the employer have to prove?
Every year from the priority date until the worker becomes a permanent resident, and each year stands on its own. A strong 2024 does not cover a weak 2025. When the petition is filed, the employer must include the most recent available tax return, annual report, or audited financial statement for each year from the priority date. If the return for the priority-date year has not been filed yet, the Policy Manual allows USCIS to consider the prior year’s document as part of its overall assessment, but the obligation to cover the priority-date year does not go away, and USCIS can ask for it later.
The priority-date year itself gets special treatment, because the obligation only begins on the priority date. An employer can ask USCIS to prorate the proffered wage for the part of that year after the priority date. A priority date of July 1 with a $100,000 proffered wage means a $50,000 obligation for that first year. The catch, and the Policy Manual is explicit about it, is that USCIS will not measure a prorated wage against a full year’s net income. If the employer wants proration, it has to show net income, or wages paid, specifically for the portion of the year after the priority date, which usually means monthly income statements. Net current assets are different: they are a snapshot as of the balance-sheet date, so the year-end figure is used against the prorated wage without any proration of the assets themselves.
The obligation continues after the I-140 is approved. Because the employer must remain able to pay until the green card is issued, USCIS can revisit ability to pay when the worker’s adjustment of status is adjudicated, and it can revoke an approved petition if the record later shows the employer could not pay. An I-140 approval is a finding that the employer has met its burden so far, not a finding that closes the question.
Can net income and net current assets be added together?
No, and this is the arithmetic mistake that shows up most often in the petitions we are asked to review after a denial. A company with $30,000 of net income and $30,000 of net current assets does not have $60,000 available for a $55,000 wage. It fails both tests. The Policy Manual explains why: net income is what was left over after a year’s expenses, while net current assets are what the company held at one moment in time, and adding a period figure to a point-in-time figure double counts. The same logic bars adding prorated net income to net current assets in the priority-date year.
Three related rules trip people up. Depreciation is not added back to net income, which matters for any business with significant equipment. An undrawn line of credit is not cash; only amounts actually drawn appear on the balance sheet, and they appear as a liability as well as an asset. And bank statements, which employers love to submit, prove only what was in the account on a given day, not whether that money was already committed. If the employer submits bank statements, it has to show that the balances are not the same cash already counted in net current assets, and that enough of it is uncommitted to cover the wage.
What documents does USCIS actually require?
One of three: the company’s annual report, its federal tax return, or audited financial statements, for each year from the priority date. For a company with 100 or more employees, USCIS may accept a statement from a financial officer of the company instead, and the Policy Manual says detailed letters that explain the finances behind the conclusion are the ones that carry weight; a one-line letter can still be questioned, particularly if the company is sponsoring several workers or the record suggests it has fewer than 100 employees.
For the small and mid-sized employers we usually represent, the document is the federal tax return, and USCIS reads it as a whole. Submit the complete return with every schedule, especially the balance sheet schedule that net current assets come from. Two cautions from the Policy Manual are worth repeating. Financial statements that are merely compiled or reviewed by an accountant are not audited statements and cannot substitute for the return; they can only be added to it as supporting evidence. And amending a tax return in the middle of an adjudication invites USCIS to demand IRS-certified transcripts, so if the return needs to be fixed, fix it before filing, not after the request for evidence arrives.
Beyond the required document, the regulation allows the employer to submit, and USCIS to request, profit-and-loss statements, bank records, and personnel records. Those are supporting evidence. They are read together with the tax return, not instead of it, and they are only useful when they prove something specific.
Does the owner’s personal money count?
Usually not, and the answer depends entirely on how the business is organized. The Policy Manual’s rule is that USCIS considers only the resources of the entity that has a legal obligation to pay the wage. That means it does not count the personal income or assets of a corporation’s shareholders or officers, the resources of a parent company or affiliate (if the parent files consolidated returns or statements, the sponsoring subsidiary’s own figures need to be broken out), or, as the manual reads today, the personal assets of the members of an LLC, including a single-member LLC, because the member is not personally liable for the company’s debts even when the IRS treats the LLC as a disregarded entity.
The exceptions are the business forms where the owner is personally on the hook. A sole proprietor is the business, so USCIS looks at the owner’s adjusted gross income minus personal living expenses, and the owner’s liquid assets minus any encumbrances on them. A general partner is personally liable for partnership debts, so if the partnership itself falls short, USCIS may consider whether a general partner is willing and able to make up the difference, using the same analysis. Limited partners get no such treatment.
Employers form LLCs precisely so that their personal assets are protected, and the ability-to-pay rule is the mirror image of that choice: the protection that keeps creditors away from the owner’s house also keeps the owner’s house out of the I-140. A federal court in Montana let stand a USCIS decision that drew exactly this kind of entity-form line, in Howell v. Garland, No. CV 23-23-BLG-KLD (D. Mont. May 5, 2025). There, USCIS had counted the owner’s personal finances for the year the company was a single-member LLC but refused to count them once the company became an S corporation; the court found that reasoning supported by the record, although it held that it had no jurisdiction to review the revocation itself. Note that the current Policy Manual is stricter than the position USCIS took in that case: as the chapter reads today, a single-member LLC’s owner does not count either. The safe assumption for any LLC or corporation is that the company must pass on its own numbers.
The related trap is the promise of money that has not arrived. A letter from an investor or an owner saying they stand ready to contribute capital proves nothing, because the company does not have the money. The same capital, actually deposited into the company’s account before the balance-sheet date, is a current asset and counts in full. The Policy Manual does allow USCIS to consider that an officer of the company is willing and able to give up their own compensation to cover the wage, but that is one factor in the totality analysis described below, not a substitute for a test.
What if the company had a loss year?
Then test two fails for that year, and if neither wages already paid nor net current assets covers the wage either, the employer is asking USCIS to approve the petition anyway under what is called the totality-of-the-circumstances analysis. That door exists, but it is narrower than most people, including many lawyers, believe.
The analysis comes from a 1967 decision, Matter of Sonegawa, 12 I&N Dec. 612 (Reg’l Comm’r 1967). The petitioner there was a Pasadena dress designer who had been in business for more than eleven years, employed four to eight people, paid over $19,000 in wages the previous year, and had been featured in Time and Look. Her 1966 return showed a net profit of $280 against a $6,240 annual wage, because that year she had moved to a better location, paid double rent for five months, and went through a period when she could not do regular business; the first five months of 1967 already showed a $4,774 profit. On those facts the Regional Commissioner found that her “expectations of continued increase in business and increasing profits are reasonable expectations” and approved the petition.
Read the facts before the holding. What carried Sonegawa was not optimism about the future; it was a documented, profitable past with a single explained disruption and evidence of recovery already in hand. The Policy Manual’s current list of totality factors tracks those facts almost one for one: the number of years in business, the company’s historical growth, its gross revenues, total wages paid to existing employees, any recent event that disrupted the business, uncharacteristic losses the company has since recovered from, the number of employees, media coverage, and the company’s reputation in its industry. The manual gives as its own example a petitioner with “one unprofitable year despite a history of profitability.” It also mentions two narrower situations that can help: the sponsored worker is replacing a departed employee or an outsourced service the company was already paying for, or an officer is willing to forgo compensation to fund the wage.
The courts have made the limit explicit. In Taiyang Foods Inc. v. USCIS, 444 F. App’x 115 (9th Cir. 2011), an unpublished decision that federal district courts, including the one in Montana, have nonetheless followed, the Ninth Circuit affirmed a denial with one sentence that every young business should read twice: “Sonegawa is applicable to this case only if the failure of Taiyang Foods to pay the proffered wage was an anomaly amongst profitable years.” The company there was newly created when its priority date was established in 2002 and had no profitable history, so, in the court’s words, “it could not demonstrate that 2002 was anomalous,” and USCIS did not even have to reach the totality analysis.
That is the structural problem for startups and for any business still operating near breakeven, and it is worth stating plainly because it is the part most guides leave out. A loss can only be an anomaly against a background of profits. A company that opened two years before the priority date and has not yet had a profitable year has nothing for the loss to be anomalous against. It fails the three tests, and, under the Ninth Circuit’s reading of Sonegawa, it is shut out of the exception that was built for companies that fail the three tests. The Montana decision cited above applied Taiyang to a business that began operating in late 2017 and showed losses in 2019 and 2020. USCIS had recognized that the pandemic may have contributed to the 2020 loss; the court found the denial reasonable anyway, because the record did not show a profitable pattern for the loss to be measured against.
The Policy Manual does hold one door open that Sonegawa did not: it says that some companies deliberately run at a loss for a period to build their position, using research-and-development spending as its example, and that in those cases the documentation should fully explain where the funding comes from and what profit the company expects and when. That language helps a funded technology or research company with a coherent plan. It does not help a business that is simply losing money.
Do letters from the accountant or the bank help?
Not on their own, and relying on them is the most common mistake in loss-year cases. A letter from the company’s CPA saying the company has always met payroll, or from its banker saying every loan is current, is an assertion. USCIS is entitled to ask for the documents behind it. In Howell v. Garland, the Montana federal court considered exactly such letters, from the company’s accountant and from a loan officer at its bank, and held: “But these general assertions were not supported with any evidence documenting Plaintiff’s loan and wage payments. An agency does not act arbitrarily and capriciously by refusing to credit letters that are not supported by documentary evidence.”
The lesson is not that the letters were wrong. It is that the things they asserted were provable, and the proof was never attached. If the company has met payroll through a loss year, the payroll registers and quarterly wage reports prove it. If the company has stayed current on its loans, the loan statements prove it. If customers owe the company money that a cash-basis tax return does not show, an accounts-receivable aging with evidence of subsequent collection proves it. Those documents already exist inside every business. They cost nothing to produce, and they are what turns a letter into evidence. When we prepare a loss-year petition, every sentence in a supporting letter is matched to an exhibit, and a sentence that cannot be matched to an exhibit does not go in the letter.
What if the employer is sponsoring more than one worker?
Then USCIS may ask whether the company can pay all of the proffered wages together, for every year from the priority date of the petition under review. The Policy Manual excludes from that count any other petition whose worker has already received a green card, that was withdrawn, that was denied or revoked with no appeal or motion pending, or whose priority date is later than the petition being decided. The analysis disappears entirely if the company has been paying the worker in the petition under review the full proffered wage all along, which is another reason test one matters. Employers with several pending petitions should assemble a list of every I-140 receipt number, its beneficiary, its proffered wage, its priority date, its status, and the wages actually paid to each worker, because that is what USCIS will request.
Howell is also a caution on this point. The employer there had filed two petitions; USCIS denied one and approved the other. After the employer sued and argued that the two decisions were inconsistent, USCIS re-examined the approved petition, concluded the approval had been a mistake, and revoked it. The court held that it could not review the revocation itself, under the Supreme Court’s decision in Bouarfa v. Mayorkas, and rejected the employer’s claim that the revocation was retaliation, citing the longstanding rule from Matter of Ho that an agency’s realization that it erred in approving a petition can be good cause to revoke it. The practical point for employers with multiple petitions is that an inconsistency between two decisions is not necessarily an asset. The agency can cure an inconsistency in either direction.
What happens if the business is sold, or the worker changes jobs?
If the sponsoring company is sold and the buyer takes over the petition as a successor-in-interest, the buyer must show that the original employer could pay the wage from the priority date until the sale, and that the buyer has been able to pay it since. Two companies’ financials, two periods, one continuous obligation.
If the worker’s adjustment application has been pending 180 days or more and the worker moves to a new employer in the same or a similar occupation under the AC21 portability rule, USCIS still examines the original employer’s ability to pay, but only on the facts as they stood when the petition was filed, through the filing date. The original employer’s finances after that point stop mattering, which is one of the few situations where the “continuing until permanent residence” obligation is cut short.
Nonprofit employers, which do not file income-tax returns, prove ability to pay with their Form 990, an annual report, or audited statements. The tests are the same; only the document changes.
How do you tell, before anyone files, whether there is a problem?
Run the five-minute check against every year from the expected priority date forward, using the actual proffered wage. If the company passes test one, two, or three for each year, ability to pay is a paragraph and a tax return, and the harder questions on this page do not apply. Employers in that position should still be careful about one thing: the obligation continues for years, and a company that passes comfortably today should think about whether it will still pass if the wait for a visa number stretches out.
If the company fails all three tests for any year, the first question is whether the failure can be repaired rather than argued. Employing the worker, at any lawful wage, shrinks the number that has to be proven and starts building the best evidence there is. Capital that an owner intends to contribute should be contributed before year-end, not promised in a letter. A cash-basis return that shows zero receivables for a business that invoices heavily can be supplemented with an accrual-basis financial statement, though only an audited statement substitutes for the return; anything less is supporting evidence. And if the company’s tax preparer has parked a loan from an owner or an affiliate that has no due date inside twelve months among the current liabilities, correcting that classification can change net current assets by more than any argument will.
If the failure cannot be repaired and the company has no profitable history, understand before filing that the totality analysis is unlikely to be available, that federal courts have consistently upheld USCIS on that point, and that the petition will rise or fall on documents rather than on the strength of the business plan. That is a hard conversation, and it is better had at the planning stage, when the employer can still decide whether and when to start the employment-based green card process, than after a labor certification has been obtained and the priority date is fixed. For employers deciding whether permanent sponsorship is realistic at all, our overview of immigration options for employers covers the temporary and permanent routes side by side.
If you are weighing a sponsorship and want the three tests run against real numbers before anything is filed, a strategy consultation is the right first step, and you can reach us through our contact page. Bring the labor certification, or the expected wage, and the last two years of returns. Five minutes with those documents usually answers the question.
