Nonprofit tax-exempt organizations have unique considerations with respect to navigating U.S. immigration processes and entity formation. Organizations hiring new talent or bringing employees across borders need to be aware of how their nonprofit corporate and tax-exempt statuses may impact and be impacted by immigration processes and rules.
This article provides an overview of several employment and immigration compliance topics affecting nonprofit tax-exempt organizations operating in the U.S.
From a nonprofit director’s perspective, hiring the most talented and dedicated employees is critical to growing the organization and accomplishing its mission. During interviews, employers may be eager to identify key skills and attributes to ascertain “fit.” Interviewing, though, can present a minefield of employment discrimination challenges. In addition to questions that run afoul of various federal and state anti-discrimination provisions, or questions that may violate the growing number of state and local laws prohibiting asking applicants about their criminal or pay histories, questions that focus on nationality or immigration status are similarly fraught.
According to the Department of Justice’s (DOJ) Immigrant and Employee Rights Section, employers may ask the following two questions on job applications and during interviews (and should ask these questions uniformly of all applicants, regardless of citizenship):
- Are you legally authorized to work in the United States?
- Will you now or in the future require sponsorship for employment visa status (e.g., H-1B visa status)?
Work authorization and immigration questions beyond these two questions run the risk of violating the anti-discrimination provisions of the Immigration and Nationality Act. Employers should seek experienced counsel if sponsorship or other work authorization issues arise during the course of an interview or other hiring conversation.
Work Authorization and I-9 Compliance
The two questions mentioned above are applicable in the interviewing context. Once an individual has accepted an offer of employment, their identity and U.S. work authorization must be verified. All U.S. employers — including nonprofit organizations, religious institutions and new ventures — have the obligation to confirm the work authorization and identity of all employees hired after November 6, 1986, by properly completing and retaining Form I-9. For nonprofit organizations, it is important to note that even the founders must complete a Form I-9 (although board members, contractors and vendors do not). Following employee departures, the form must be retained for three years after the date of hire, or one year after the date employment ends, whichever is later.
All U.S. employers have three primary obligations when completing a Form I-9 (for any employee, not just employees who are not U.S. citizens or permanent residents). They must ensure that:
- The I-9 is completed accurately and thoroughly, including confirming that the employee properly completed Section 1.
- The documents presented by the employee relate to that employee.
- The documents look reasonably genuine on their face.
In many cases, the Form I-9 is a straightforward process. Employers often get tripped up, however, when employees have expiring work authorization documents or documents that have unique auto-extension rules (like some Employment Authorization Cards for beneficiaries of Temporary Protected Status (TPS), discussed below, and others). Failure to have an accurate, up-to-date and verified Form I-9 on file for every employee can get very costly in the event of a government audit, even for a small new business. In FY 2019, U.S. Immigration and Customs Enforcement (ICE) initiated 6,812 new investigations and conducted 6,456 Form I-9 inspections of U.S. employers and organizations that resulted in 2,675 arrests (2,048 administrative arrests and 627 criminal arrests). Fines for I-9 violations increased in 2019, and in recent years, the DOJ’s Immigrant and Employee Rights Section has fined employers (including nonprofit employers) hundreds of thousands of dollars for discrimination and unfair document practices in the I-9 process.
Nonprofit organizations, especially those with hourly employees or employees with temporary work authorization, can face steep fines for failure to comply with I-9 regulations. Ensuring that the person responsible for completing I-9s in the organization has regular I-9 training and has access to competent and current counsel is critical to ensuring employers’ I-9 compliance. Organizations of all sizes need to be aware of the compliance issues affecting the entire workforce, particularly hourly workers. Some employees work pursuant to work authorization that is granted to them because of their status as refugees or asylees or because the government has granted them TPS because their home countries have experienced a devastating natural disaster or civil war. Employers do not need to file applications or petitions in order for these individuals to work for them. It is often at the onboarding stage when employees are presenting identity documents in connection with Form I-9 that their status comes to light. However, employers do need to be vigilant regarding work authorization expiration dates as TPS beneficiaries’ employment authorization documents expire.
Of note, the Biden administration outlined its support for TPS and has proposed a path to citizenship for TPS holders as part of a comprehensive immigration reform bill. This is a dramatic change in course from the Trump administration’s efforts to end TPS for beneficiaries from El Salvador, Haiti, Nicaragua, Nepal, Honduras and Sudan, which were enjoined by federal courts. For employers with many TPS beneficiaries (including many larger nonprofit organizations), the end of TPS would have a noticeable impact on the workforce.
Nonprofit organizations may also need to consider employment-based immigration options for candidates who are not already U.S. workers. Although business immigration can get complicated, employers should not be deterred from exploring visa categories that require the organization to sponsor workers. Flexibility on sponsorship will allow employers to hire the best employees for the job, including new graduates from U.S. universities who are international students, researchers, professionals and other workers. In addition, sponsorship will allow nonprofit organizations to transfer certain employees from international affiliate offices into the U.S.
Relevant Employment-Based Visa Categories
- H-1B — Specialty Occupation
The H-1B visa is one of the most common work visas for organizations that need to hire professional, qualified non-U.S. citizen talent, and this visa program can be particularly intimidating to nonprofit organizations, particularly due to the prevailing wage requirement. The H-1B visa classification is for specialty occupations, which means occupations that require: (1) theoretical and practical application of a body of highly specialized knowledge; and (2) attainment of a Bachelor’s or higher degree in the specific specialty (or its equivalent) as a minimum requirement for entry into the occupation in the United States. The foreign national must meet the requirements for the position, including having a Bachelor's degree or higher. The employer must also demonstrate that it is offering the prevailing wage for the occupation in the proposed labor market. For some nonprofits, this requirement may mean that the H-1B is no longer a viable option for talent they seek to hire.
IT professionals, financial specialists, ministers, scientists, economists and other professional positions typically qualify as “specialty occupations” under the H-1B rules. For entry-level positions, nonprofit organizations may seek to hire new graduates. If a recent graduate was studying in the U.S. on a student visa, the student will often have a period of work authorization after graduation, but eventually, the student will need to secure a longer-term work visa, and the H-1B is a popular choice for these employees.
Another challenge for employers seeking to apply for H-1B visas for their employees is timing. A limited number of visas are available each year. Because more H-1B petitions are filed than are available, employers must first submit an online registration on behalf of a candidate or employee who seeks H-1B status in the first three weeks of March. At the end of March/early April, registrations are randomly selected in a lottery, and employers may proceed in preparing and filing H-1B petitions on behalf of individuals whose registrations were selected.
A key question for nonprofit organizations considering hiring an employee who requires an H-1B visa is whether the organization is subject to the H-1B “cap.” The cap is a limit of 65,000 new H-1B visas per fiscal year and an additional 20,000 new H-1B visas per fiscal year for individuals who have graduated with a Master’s degree or above from a U.S. university (for a total of 85,000). Some types of organizations and applicants are exempt from this cap, meaning they may submit new H-1B petitions at any time during the year, without concern for whether the H-1B cap limit has been reached. Cap-exempt categories include:
- Employees offered positions at institutions of higher education (i.e., colleges and universities).
- Employees offered positions at nonprofit entities related to or affiliated with institutions of higher education.
- Employees offered positions at nonprofit research organizations.
- Employees offered positions at governmental research organizations (which includes state and local government research entities in addition to federal ones).
A nonprofit organization that may be considered a nonprofit entity related to or affiliated with an institution of higher education needs to show either that it is connected to or associated with an institution of higher education through shared ownership or control by the same board or federation; that it is operated by an institution of higher education; that it is attached to an institution of higher education as a member, branch, cooperative or subsidiary; or that is has entered into a formal written affiliation agreement with an institution of higher education that establishes an active working relationship between the nonprofit entity and the institution of higher education 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. These rules require a close review of the formation, governance and contractual documents of both nonprofits involved since nonprofits generally are not formed as owned entities and therefore must be tethered pursuant to these rules in other ways.
The definitions above have been updated and effective as of January 17, 2017, with the implementation of the skilled worker rule, which changed the definition of H-1B cap-exempt employers.
Note that if an individual is employed by both a cap-exempt entity (such as a university) and a cap-subject entity (such as a private company) at the same time, that individual is considered cap-exempt for purposes of a concurrent H-1B employment petition for the cap-subject entity. However, if the cap-subject entity wants the H-1B worker to work full time, an H-1B cap-subject petition must be filed under the lottery system so that it can be selected and then approved with an available H-1B cap number. Once approved, the full-time employment with the cap-subject entity can then start on October 1 as any other cap-subject case selected in the H-1B lottery.
Therefore, nonprofit organizations that are connected to institutions of higher education should seek to determine whether they may be considered cap-exempt per the options above. Those entities recognized as cap-exempt in prior years may need to submit additional information to prove ongoing eligibility for cap-exemption under the new regulations.
The ability to submit H-1B petitions for professionals at any point during the fiscal year is a huge advantage in the search for talent and the ability to onboard employees in a timely fashion. However, scrutiny on all H-1B petitions — both cap-subject and cap-exempt — increased dramatically during the Trump administration. Requests for Evidence (RFEs) and even denials have been issued by U.S. Citizenship and Immigration Services (USCIS) at an unprecedented rate, causing processing delays and headaches for nonprofit organizations that require H-1B visas for professional staff.
- TN — Mexican and Canadian Professionals
The TN is a visa option for Mexican and Canadian professionals in certain occupational categories that allows for U.S. work authorization on a fairly straightforward basis. There is no limit on the number of years one can work in TN status, and there are no limits on the number of new TNs in a given fiscal year.
To qualify in many of the professional TN categories, a Canadian or Mexican national must meet the following requirements:
- Be a citizen of Mexico or Canada.
- Hold a related baccalaureate degree.
- Have a job offer from a U.S. employer.
Canadian citizens may apply for TN status at the U.S.-Canada border or airport pre-clearance/pre-flight station. They are admitted in TN status without the need for a visa stamp in their passport. Alternatively, a U.S. employer may choose to file a TN visa petition on behalf of a Canadian citizen who is outside the U.S. with USCIS. Once the petition is approved, the Canadian citizen will present the approval notice and supporting documentation at a designated U.S. port of entry or pre-clearance/pre-flight inspection.
Mexican nationals apply for a TN visa at a U.S. embassy or consulate in Mexico, where a TN visa stamp is issued. Once the TN visa is issued, application for admission to the U.S. in TN status is made at the port of entry.
The initial period of stay in the U.S. in TN status is up to three years. Individuals who wish to remain in the U.S. beyond the initial three-year period must either file for an extension of stay with USCIS or depart from the U.S. and reapply for TN status using the same application procedures outlined above. TN extensions of stay are usually granted in three-year increments.
- O-1 — Extraordinary Ability
For certain nonprofit organizations, some non-U.S. citizen candidates may qualify for an O-1 visa, which is reserved for individuals of “Extraordinary Ability or Achievement.” This visa requires evidence that the candidate meets three of the 10 categories below to be eligible:
- Receipt of nationally or internationally recognized prizes or awards for excellence in the field of endeavor.
- Membership in associations in the field for which classification is sought, which requires outstanding achievements, as judged by recognized national or international experts in the field.
- Published material in professional or major trade publications, newspapers or other major media about the beneficiary and the beneficiary’s work in the field for which classification is sought.
- Original scientific, scholarly or business-related contributions of major significance in the field.
- Authorship of scholarly articles in professional journals or other major media in the field for which classification is sought.
- A high salary or other remuneration for services as evidenced by contracts or other reliable evidence.
- Participation on a panel, or individually, as a judge of the work of others in the same or in a field of specialization allied to that field for which classification is sought.
- Employment in a critical or essential capacity for organizations and establishments that have a distinguished reputation.
Nonprofit leaders have been successful in securing O-1 visas as an “alien of extraordinary ability in business,” even if that person has never worked in/been known for their achievements in for-profit business. A full review of all facts and experience of the individual goes a long way in determining whether an individual could qualify for an O-1 visa.
- E-3 — Australian Professional
Australian citizen professionals who otherwise qualify under the H-1B standards described above may seek E-3 status. Although infrequently used, organizations should keep the E-3 nonimmigrant visa category in mind for potential Australian hires.
- R-1 — Religious Worker
The R-1 visa category is intended for employees who will work as a minister or in a religious vocation, to be employed by a nonprofit religious organization or a nonprofit organization affiliated with a religious denomination. R-1 visa holders must have been a member of the religious denomination for at least two years before the U.S. employer files the R-1 petition with USCIS. The types of occupations that qualify for an R-1 are quite narrow — not just any employee working for a religious nonprofit qualifies. Furthermore, organizations filing R-1 petitions are subject to pre-approval on-site inspections by USCIS.
- B-1 Visa — Business Travel
The B-1 visa is available to foreign nationals for temporary visits to the U.S. The B-1 visa is available for business travel for a specific and limited period of time. Permissible business activities include but are not limited to consulting with colleagues and associates, participating in short-term training, attending professional conventions or conferences, or negotiating a contract or grant. Fundraising meetings or board meetings are also permissible under the B-1. The maximum amount of time permitted in B-1 status on any one trip is one year. The B-1 visitor is prohibited from engaging in any hands-on, productive work. Individuals from certain countries may be eligible to enter the U.S. without a visa (under the Visa Waiver Program).
U.S. Organizations Established by Foreign Nationals
Much of what is discussed above applies to any new U.S. organization. There are several additional visa considerations worth discussing for nonprofit leaders/founders who are not U.S. citizens, including the founder’s own work authorization, and whether the U.S. organization is brand new or is a new U.S. office/branch of an entity located abroad.
It is not uncommon that international students studying in U.S. graduate schools want to launch new organizations during or just after graduation. Students in F-1 visa status must tread carefully — certain activities will lead to a student visa status violation, which will jeopardize future immigration options. The rules for maintaining F-1 status indicate that students are generally prohibited from “engaging in business” without prior authorization from the school related to Curricular Practical Training (CPT) or Optional Practical Training (OPT). If an F-1 student does not wish to use CPT or OPT to establish the organization, he or she must have a defensible position as to actual day-to-day duties steering clear of productive work. Registering a 501(c)(3), negotiating leases, opening bank accounts, hiring employees, serving on the board of directors for the organization, and attending meetings with fundraisers/investors are generally permissible activities for F-1 visa holders. Note that the primary test is whether the F-1 student and the nonprofit organization have an employer-employee relationship, even if the F-1 student takes no income from the organization. Keeping clear records, documenting everything and seeking legal advice will mitigate the risk to some extent, but this endeavor in not completely risk-free. The best option is to utilize CPT or OPT to run the organization, maintaining clear communication with school authorities to ensure the work is approved.
Other U.S. Visa Categories
Similarly, individuals who are in the U.S. in visa categories other than F-1 (e.g., H-1B, TN, L-1, etc.) are not permitted to engage in employment outside of the terms of their visa-authorized employment. For an H-1B employee, the framework for permissible work activity is outlined in the H-1B petition prepared by the employer and filed with USCIS. H-1B visa holders may hold concurrent H-1B visas, however, so if the H-1B visa holder starts working for a nonprofit organization, he or she may be eligible for a second H-1B visa in order to work for the nonprofit. Note, however, that there are complex rules as to when this eligibility is created. Not all H-1B visa holders may self-petition for the startup H-1B, so consulting with an experienced immigration attorney is necessary to secure proper work authorization for starting a new nonprofit organization while already in the U.S. working for another employer in H-1B status.
For TN visa holders, depending on the nature of the nonprofit organization and the nature of the individual’s work within that organization, it may be possible to petition for a concurrent TN with the nonprofit as the employer. Self-employment is prohibited, but if the TN holder will be performing work for a U.S. organization and is employed by the Canadian or Mexican organization contracted to perform the work for the U.S. organization, then it is possible. Again, there is no opportunity to self-petition for a TN, but with a proper management/board structure in place, a nonprofit founder could obtain TN status to perform work for that entity, being careful to comply with all relevant TN rules.
Outside of U.S./Looking to Establish Office in U.S.
As organizations based in other countries expand markets and establish international missions and seek to operate from a U.S. base, there may be an organizational need to establish an office located in the U.S. In addition to the typical business registration requirements, foreign entities sending employees to the U.S. to set up or support the new office need appropriate visas and work authorization.
- L-1 Visa — Intracompany Transfer
The L-1 visa category is intended for individuals working in either a specialized knowledge or managerial/executive capacity abroad for at least 12 months in the previous three years to come to the U.S. to work for an affiliated entity in either a specialized knowledge or managerial/executive capacity. The L-1 worker must have an employer-employee relationship with the U.S. entity and cannot be self-employed (but can be the sole shareholder of the U.S. entity). USCIS has issued specific guidance on how a new U.S. affiliate office that has not yet established proof of extensive activity can employ an L-1 manager or executive, which includes establishing sufficient office space, proving the employee’s one-year employment abroad, and details regarding the U.S. organization that show that, within a year, it could support an executive or managerial position. Despite the “business-focused” language of the L-1 rules, nonprofit organizations and employees can successfully petition for L-1 status.
There are no numerical limits on L-1 visas. For L-1A managers and executives, the total period of authorized employment is seven years (three years of initial validity plus two two-year extensions). For L-1B workers, that total period of authorized employment is five years (three years of initial validity plus one two-year extension). Note that a “new office” petition only gives one year of validity, at the end of which the U.S. organization must exhibit sufficient evidence that it is active and operating.
- E-1/E-2 — Treaty Trader/Investor
For certain countries that have valid treaties of commerce or navigation with the U.S. (a list of which is available here), a new U.S. business can be established through preparing an E-1 or E-2 petition, submitting it to the relevant U.S. embassy, and securing a visa for an individual employee to establish a U.S. entity, develop U.S. business ties and otherwise work in the U.S. Importantly, because the E-1/E-2 employee must be coming to the U.S. to engage in substantial trade, principally between the U.S. and the treaty country, or to develop and direct the operations of a U.S. enterprise in which the employee has invested a substantial amount of capital, the E-1/E-2 visa option is not viable for nonprofit organizations.
Other Immigration Considerations for U.S. Nonprofit Organizations
Finally, it is important for nonprofit tax-exempt organizations to stay on top of changing rules in international travel, including travel restrictions for individuals from certain countries, delays in visa issuance for employees obtaining new visas at embassies outside the U.S., and extreme vetting and scrutiny for all travelers into the U.S., regardless of citizenship. Nonprofit boards of directors, leadership and employees are globally mobile; staff travel to conferences around the world; and employees may have family members affected by changing immigration rules and policies.
The immigration landscape is shifting quickly. Nonprofit organizations — including newly established organizations and U.S.-based field offices — need to be able to discern which shifts can impact their workforces to prepare, be compliant, and continue identifying, attracting and retaining highly qualified talent while ensuring compliance with their ongoing nonprofit and tax-exempt statuses.