dismissed EB-3 Case: Film Production

identifyingdatadeletedto
preventclearlyunw~ted
invasionofpersonalprivacy
PUBLIC COpy
U.S. Department of Homeland Seeurity
20 Mass. Ave., N.W., Rm. 3000
Washington, DC 20529
u.S. Citizenship
and Immigration
Services
WAC 04 21750862
Office: CALIFORNIA SERVICE CENTER Date: APR 10 2007
INRE: Petitioner:
Beneficiary:
PETITION: Immigrant Petition for Alien Worker as a Skilled Worker or Professional Pursuant to
Section 203(b) of the Immigration and Nationality Act, 8 U.S.c. § I 153(b)
c.
ON BEHALF OF PETITIONER:
INSTRUCTIONS:
This is the decision of the Administrative Appeals Office in your case. An documents have been returned
to the office that originally decided your case. Any further inquiry must be made to that office.
Robert P. Wiemann, Chief
Administrative Appeals Office
www.uscis.gov
Page 2
DISCUSSION: The Director, California Service Center denied the employment-based immigrant visa
petition. The petition is now before the Administrative Appeals Office (AAO) on appeal. The appeal will
be dismissed.
The petitioner is a television/film production and marketing firm. It seeks to employ the beneficiary
permanently in the United States as an executive secretary and administrative assistant. As required by
statute, a Form ETA 750, Application for Alien Employment Certification, approved by the Department
of Labor, accompanies the petition. The director determined that the petitioner had not established that it
had the continuing ability to pay the beneficiary the proffered wage beginning on the priority date of the
visa petition and denied the petition accordingly.
The record shows that the appeal is properly filed, timely and makes a specific allegation of error in law or
fact. The procedural history in this case is documented by the record and incorporated into this decision.
Further elaboration of the procedural history will be made only as necessary.
As set forth in the director's July 9, 2005 denial, the single issue in this case is whether or not the petitioner
has the ability to pay the proffered wage as of the priority date and continuing until the beneficiary obtains
lawful permanent residence.
Section 203(b)(3)(A)(i) of the Immigration and Nationality Act (the Act), 8 U.S.c. § 1153(b)(3)(A)(i),
prOVIdesfor the granting of preference classification to qualified immigrants who are capable, at the time
of petitioning for classification under this paragraph, of performing skilled labor (requiring at least two
years training or experience), not of a temporary or seasonal nature, for which qualified workers are not
available in the United States.
Section 203(b)(3)(A)(ii) of the Act, 8 U .S.c. § 1153(b)(3)(A)(ii), provides for the granting of preference
classification to qualified immigrants who hold baccalaureate degrees and are members of the
professions.
The regulation at 8 C.F.R. § 204.5(g)(2) states, in pertinent part:
Ability o/prospective employer to pay wage. Any petition filed by or for an employment­
based immigrant which requires an offer of employment must be accompanied by
evidence that the prospective United States employer has the ability to pay the proffered
wage. The petitioner must demonstrate this ability at the time the priority date is
established and continuing until the beneficiary obtains lawful permanent residence.
Evidence of this ability shall be in the form of copies of annual reports, federal tax
returns, or audited financial statements. In a case where the prospective United States
employer employs 100 or more workers, the director may accept a statement from a
fmancial officer of the organization which establishes the prospective employer's ability
to pay the proffered wage. In appropriate cases, additional evidence, such as profit/loss
statements, bank account records, or personnel records, may be submitted by the
petitioner or requested by [Citizenship and Immigration Services (CIS)].
The petitioner must demonstrate the continuing ability to pay the proffered wage beginning on the priority
date, which is the date the Form ETA 750 was accepted for processing by any office within the
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employment system of the Department of Labor. See 8 C.F.R. § 204.5(d). The priority date in the instant
petition is October 1,2001. The proffered wage as stated on the Form ETA 750 is $42,000 annually.
The AAO takes a de novo look at issues raised in the denial of this petition. See Dor v. INS, 891 F.2d 997,
1002 n. 9 (2d Cir. 1989)(noting that the AAO reviews appeals on a de novo basis). The AAO considers all
pertinent evidence in the record, including new evidence properly submitted upon appeall . Relevant
evidence submitted on appeal includes counsel's brief, a copy of an AAO non-precedent decision,2 and a
copy of a pay stub, issued by the petitioner, to the beneficiary for the pay period June 26, 2005 through July
9,2005. Other relevant evidence includes copies of the petitioner's 2001 through 2004 Forms 1120S, U.S.
Income Tax Returns for an S Corporation, copies of pay stubs, issued by the petitioner, to the beneficiary for
the pay periods December 26, 2004 through April 2, 2005, copies of the petitioner's Employer's Quarterly
State Report of Wages Paid to Each Employee for the quarters ending in December 31, 2003, March 31
2004, September 30, 2004, December 31, 2004, and March 31, 2005, a letter from
Certified Public Accountant (CPA) with and an unaudited Profit and Loss
Statement for the petitioner for the period January 2005 through March 2005. The record does not contain
any other evidence relevant to the petitioner's ability to pay the proffered wage.
The petitioner's 2001 through 2004 Forms 1120S reflect ordinary incomes or net incomes of $89,090
(Schedule K),3 -$59,561, -$71,292, and -$2,314, respectively. The petitioner's 2001 through 2004 Forms
1120S also reflect net current assets of $169,974, $10,393, -$27,418 and -$13,020, respectively.
The petitioner's 2005 unaudited profit and loss statement4 reflects total income of $184,768.32, wages paid of
$40,102.57, and a net income of$9,812.18.
1 The submission of additional evidence on appeal is allowed by the instructions to the Form 1-290B,
which are incorporated into the regulations by the regulation at 8 C.F.R. § 103.2(a)(1). The record in the
instant case provides no reason to preclude consideration of any of the documents newly submitted on
appeal. See Matter ofSoriano, 19 I&N Dec. 764 (BIA 1988).
2 While 8 C.F.R. § 103.3(c)provides that precedent decisions of CIS are binding on all its employees in the
administration of the Act, unpublished decisions are not similarly binding. Precedent decisions must be
designated and published in bound volumes or as interim decisions. 8 c.F.R. § 103.9(a).
3 Where an S corporation's income is exclusively from a trade or business, CIS considers net income to
be the figure for ordinary income, shown on line 21 of page one of the petitioner's Form 1120S. The
instructions on the Form 1120S, U.S. Income Tax Return for an S Corporation, state on page one,
"Caution, Include only trade or business income and expenses on lines 1a through 21."
Where an S corporation has income from sources other than from a trade or business, net income is found
on Schedule K. The Schedule K form related to the Form 1120S states that an S corporation's total
income from its various sources are to be shown not on page one of the Form 1120S, but on lines 1
through 6 of the Schedule K, Shareholders' Shares of Income, Credits, Deductions, etc. See Internal
Revenue Service, Instructions for Form 1120S, 2003, at http://www.irsgov/pub/irs-03/i1120s.pdf,
Instructions for Form 1120S, 2002, at http://www.irs.gov/pub/irs-02/i1120s.pdf, (accessed February 15,
2005).
4 The regulation at 8 C.F.R. § 204.5(g)(2) makes clear that where a petitioner relies on financial
statements to demonstrate its ability to pay the proffered wage, those financial statements must be
audited. As there is no accountant's report accompanying these statements, the AAO cannot conclude
that they are audited statements. Unaudited financial statements are the representations of management.
The unsupported representations of management are not reliable evidence and are insufficient to
Page 4
The beneficiary's pay stubs for the pay periods December 26, 2004 through April 2, 2005 and June 26,
2005 through July 9, 2005 reflect wages earned each pay period of $1,615.40 and year-to-date wages of
$21,807.90 as of July 9,2005.
The petitioner's Employer's Quarterly State Report of Wages Paid to Each Employee for the quarters ending
in December 31, 2003, March 31, 2004, September 30, 2004, December 31, 2004, and March 31, 2005
reflect no wages paid to the beneficiary until the quarter ending March 31, 2005. At that time, the
beneficiary's year-to-date earnings were $8,884.70.
The letter from the CPA states:
I am familiar with both the personal and professional financial status of the petitioner and
can attest that the corporation and sole shareholder have sufficient cash flow and assets to
fund all current and future payroll requirements.
Furthermore, recent negative net income amounts have been due to corporate accounting
deductions related to the "s" corporation which include depreciation of equipment and
distributions to the company principal. Years 2002-2004 include additional one-time
expenses related to the expansion of office space and the purchase of additional capital
equipment that the company has undertaken over the past three years in order to expand
the business. Many of the capital debts will be retired in 2005 freeing more cash to fund
planned personnel hiring.
For example: In 2004, there are deductions of $23,084 for equipment depreciation;
however the cash for these items has been paid out in previous years. Excluding
depreciation, Net Income 'would equal $21,162. Further, the company has previously
taxed Retained Earnings equaling $41,176 (See Sched M-2).
On appeal, counsel alleges that officers' compensation, the petitioner's election as an S Corporation, the
lengthy adjudication time taken by the Department of Labor (DOL) in approving the labor certification,
the September 11,2001 tragedy, the 2001-2003 recession, and the petitioner's ability to put beneficiaries
on salary as soon as such beneficiaries were authorized to do so upon their receipt of employment
authorization should be considered when determining the petitioner's ability to pay the proffered wage of
$42,000.
In determining the petitioner's ability to pay the proffered wage, CIS will first examine whether the
petitioner employed the beneficiary at the time the priority date was established. If the petitioner
establishes by documentary evidence that it employed the beneficiary at a salary equal to or greater than
the proffered wage, this evidence will be considered prima facie proof of the petitioner's ability to pay the
proffered wage. In the present matter, the petitioner submitted copies of the beneficiary's pay stubs for
the pay periods December 26,2004 through April 2, 2005 and June 26, 2005 through July 9, 2005. Each
pay period reflected wages paid to the beneficiary of$I,615.40. lfthe petitioner continued to compensate
the beneficiary at that rate for the entire year, the beneficiary would have earned $42,000.40. However,
demonstrate the ability to pay the proffered wage. Therefore, the petitioner's 2005 profit and loss
statement will not be considered when determining the petitioner's ability to pay the proffered wage of
$42,000.
Page 5
the petitioner is obligated to show that it had sufficient funds to pay the proffered wage of $42,000 from
the priority date of October 1, 2001 and continuing until the beneficiary obtains lawful permanent
residence. 8 C.F.R. § 204.5(g)(2).
As an alternate means of determining the petitioner's ability to pay, the AAO will next examine the
petitioner's net income figure as reflected on the federal income tax return, without consideration of
depreciation or other expenses. Reliance on federal income tax returns as a basis for determining a
petitioner's ability to pay the proffered wage is well established by judicial precedent. Elatos Restaurant
Corp. v. Sava, 632 F. Supp. 1049, 1054 (S.D.N.Y. 1986) (citing Tongatapu Woodcraft Hawaii, Ltd. v.
Feldman, 736 F.2d 1305 (9th Cir. 1984); see also Chi-Feng Chang v. Thornburgh, 719 F. Supp. 532
(N.D. Texas 1989); KC.P. Food Co., Inc. v. Sava, 623 F. Supp. 1080 (S.D.N.Y. 1985); Ubeda v. Palmer,
539 F. Supp. 647 (N.D. lll. 1982), aff'd, 703 F.2d 571 (7th Cir. 1983). In KC.P. Food Co., Inc. v. Sava,
the court held CIS had properly relied on the petitioner's net income figure, as stated on the petitioner's
corporate income tax returns, rather than on the petitioner's gross income. 623 F. Supp. at 1084. The
court specifically rejected the argument that CIS should have considered income before expenses were
paid rather than net income. Finally, there is no precedent that would allow the petitioner to "add back to
net cash the depreciation expense charged for the year." Chi-Feng Chang v. Thornburgh, 719 F. Supp. at
537; see also Elatos Restaurant Corp. v. Sava, 632 F. Supp. at 1054.
In the instant case, the petitioner's 2001 through 2004 net incomes from Schedule K were $89,090,
-$59,561, -$71,292, and -$2,314, respectively. The petitioner could have paid the proffered wage of
$42,000 from its net income in 2001, but not in 2002 through 2004.
Nevertheless, the petitioner's net income is not the only statistic that can be used to demonstrate a
petitioner's ability to pay a proffered wage. If the net income the petitioner demonstrates it had available
during that period, if any, added to the wages paid to the beneficiary during the period, if any, do not
equal the amount of the proffered wage or more, CIS will review the petitioner's assets. The petitioner's
total assets include depreciable assets that the petitioner uses in its business. Those depreciable assets
will not be converted to cash during the ordinary course of business and will not, therefore, become funds
available to pay the proffered wage. Further, the petitioner's total assets must be balanced by the
petitioner's liabilities. Otherwise, they cannot properly be considered in the determination of the
petitioner's ability to pay the proffered wage. Rather, CIS will consider net current assets as an
alternative method of demonstrating the ability to pay the proffered wage.
Net current assets are the difference between the petitioner's current assets and current liabilities.s A
corporation's year-end current assets are shown on Schedule L, lines I through 6. Its year-end current
liabilities are shown on lines 16 through 18. If a corporation's end-of-year net current assets are equal to
or greater than the proffered wage, the petitioner is expected to be able to pay the proffered wage out of
those net current assets. The petitioner's 2001 through 2004 tax returns reflect net current assets of
$169,974, $10,393, -$27,418 and -$13,020, respectively. The petitioner could have paid the proffered
wage of $42,000 from its net current assets in 2001, but not in 2002 through 2004.
S According to Barron's Dictionary ofAccounting Terms 117 (3rd ed. 2000), "current assets" consist of
items having (in most cases) a life of one year or less, such as cash, marketable securities, inventory and
prepaid expenses. "Current liabilities" are obligations payable (in most cases) within one year, such
accounts payable, short-term notes payable, and accrued expenses (such as taxes and salaries). Id. at 118.
Page 6
Counsel contends that officers' compensation, the petitioner's election as an S Corporation, the lengthy
adjudication time taken by the Department of Labor (DOL) in approving the labor certification, the
September 11,2001 tragedy, the 2001-2003 recession, and the petitioner's ability to put beneficiaries on
salary as soon as such beneficiaries were authorized to do so upon their receipt of employment
authorization should be considered when determining the petitioner's ability to pay the proffered wage of
$42,000.
The sole shareholder of a corporation has the authority to allocate expenses of the corporation for various
legitimate business purposes, including for the purpose of reducing the corporation's taxable income.
Compensation of officers is an expense category explicitly stated on the Form 1120S U.S. Corporation
Income Tax Return. For this reason, the petitioner's figures for compensation of officers may be
considered as additional financial resources of the petitioner, in addition to its figures for ordinary
income. However, in the instant case, counsel has not provided a notarized affidavit from the petitioner's
owner stating that he would be able and willing to forego the officers' compensation in order to pay the
beneficiary's salary. The assertions of counsel do not constitute evidence. Matter ofObaigbena, 19 I&N
Dec. 533, 534 (BIA 1988); Matter of Ramirez-Sanchez, 17 I&N Dec. 503, 506 (BIA 1980). Going on
record without supporting documentary evidence is not sufficient for purposes of meeting the burden of
proof in these proceedings. Matter of Soffici, 22 I&N Dec. 158, 165 (Comm. 1998) (citing Matter of
Treasure Craft of California, 14 I&N Dec. 190 (Reg. Comm. 1972)). Furthermore, even if the
petitioner's owner were willing to forego the officers' compensation in order to pay the beneficiary's
salary, the petitioner would still be unable to pay the proffered wage of $42,000 in 2003 by $500 and in
2004 by $11,300.6
The petitioner's CPA claims that the years 2002-2004 "include one-time expenses related to the
expansion of office space and the purchase of additional capital equipment that the company has
undertaken over the past three years in order to expand the business." However, the CPA has failed to
specify the amount of those expenses or what they include. Going on record without supporting
documentary evidence is not sufficient for purposes of meeting the burden of proof in these proceedings.
Matter ofSoffici, 22 I&N Dec. 158, 165 (Comm. 1998) (citing Matter of Treasure Craft ofCalifornia, 14
I&N Dec. 190 (Reg. Comm. 1972)).
The CPA's argument that the petitioner's depreciation deduction should be included in the calculation of
its ability to pay the proffered wage is unconvincing.
A depreciation deduction does not require or represent a specific cash expenditure during the year
claimed. It is a systematic allocation of the cost of a tangible long-term asset. It may be taken to
represent the diminution in value of buildings and equipment, or to represent the accumulation of funds
necessary to replace perishable equipment and buildings. But the cost of equipment and buildings and the
value lost as they deteriorate is an actual expense of doing business, whether it is spread over more years
or concentrated into fewer.
While the expense does not require or represent the current use of cash, neither is it available to pay
wages. No precedent exists that would allow the petitioner to add its depreciation deduction to the
amount available to pay the proffered wage. Chi-Feng Chang v. Thornburgh, 719 F.Supp. 532 (N.D.
6 The compensation of officers was $41,500 in 2003 and $30,700 in 2004. $42,000 proffered wage ­
$41,500 compensation of officers =$500 less than the proffered wage in 2003. $42,000 proffered wage ­
$30,700 compensation of officers = $11,300 less than the proffered wage in 2004.
Page 7
Texas 1989). See also Elatos Restaurant Corp. v. Sava, 632 F.Supp. 1049 (S.D.N.Y. 1985). The
petitioner's election of accounting and depreciation methods accords a specific amount of depreciation
expense to each given year. The petitioner may not now shift that expense to some other year as
convenient to its present purpose, nor treat it as a fund available to pay the proffered wage. Further,
amounts spent on long-term tangible assets are a real expense, however allocated.
Counsel states that the lengthy adjudication time taken by the DOL in approving the labor certification
should be taken into consideration when determining the petitioner's ability to pay the proffered wage of
$42,000. However, CIS has no authority over DOL's adjudication of labor certification applications, and
whether the approval of the labor certification was timely or not has no bearing on the adjudication of the
Form 1-140. CIS must abide by the guidelines established by Congress in the Act and CIS in the
regulations which state that the petitioner is obligated to establish its ability to pay the proffered wage
from the priority date of the labor certification, October 1, 2001, and continuing until the beneficiary
obtains lawful permanent residence. 8 C.F.R. § 204.5(g)(2). The fact that the petitioner did not file the
Form 1-140 with the director until August 3, 2004 does not alleviate the petitioner's responsibility to
demonstrate its continuing ability to pay the proffered wage from the priority date of October 1, 2001.
Counsel also claims that the effects of September 11, 2001 and the 2001-2003 recession should be considered
when determining the petitioner's ability to pay the proffered wage of $42,000. However, the record of
proceeding contains no evidence specifically connecting the petitioner's business decline to the events of
September 11, 2001, not even a statement from the petitioner showing a loss or claiming difficulty in
doing business specifically because of that event. A mere broad statement by counsel that, because of the
nature of the petitioner's industry, its business was impacted adversely by the events of September 11,
2001, cannot by itself, demonstrate the petitioner's continuing ability to pay the proffered wage beginning
on the priority date. Rather, such a general statement merely suggests, without supporting evidence, that
the petitioner's financial status might have appeared stronger had it not been for the events of September
11, 200I. The AAO also notes that the petitioner's tax returns suggest that 200 I was one of its best years
in the context of its gross receipts, net income, and net current assets reported from 2001 through 2004.
Counsel's statement concerning the petitioner's ability to put the beneficiary on salary as soon as she
receives employment authorization is unclear. The fact that the petitioner is filing for the beneficiary
indicates that it should be able to put the beneficiary on salary upon employment authorization. A visa
petition may not be approved based on speculation of future eligibility or after the petitioner becomes
eligible under a new set of facts. See Matter of Michelin Tire Corp., 17 I&N Dec. 248 (Reg. Comm.
1978);Matter ofKatigbak, 14 I&N Dec. 45, 49 (Comm. 1971).
The petitioner's CPA suggests that the petitioner's retained earnings should also be considered in support
of its financial ability to pay the beneficiary's wage offer. Counsel cites no authority for this proposition.
Retained earnings are the total of a company's net earnings since its inception, minus any payments to its
stockholders. That is, this year's retained earnings are last year's retained earnings plus this year's net
income. Adding retained earnings to net income and/or net current assets is therefore duplicative.
Therefore, CIS looks at each particular year's net income, rather than the cumulative total of the previous
years' net incomes represented by the line item of retained earnings.
Further, even if considered separately from net income and net current assets, retained earnings might not
be included appropriately in the calculation of the petitioner's continuing ability to pay the proffered
wage because retained earnings do not necessarily represent funds available for use. Retained earnings
can be either appropriated or unappropriated. Appropriated retained earnings are set aside for specific
Page 8
uses, such as reinvestment or asset acquisition, and as such, are not available for shareholder dividends or
other uses. Unappropriated retained earnings may represent cash or non-cash and current or non-current
assets. The record does not demonstrate that the petitioner's retained earnings are unappropriated and are
cash or current assets that would be available to pay the proffered wage. It is also noted that the court in
Sitar Restaurant v. Ashcroft, 2003 WL 22203717 at 4 (D. Mass) specifically rejected using
unappropriated retained earnings and common stock to pay the proffered wage, concluding that CIS had
sufficiently considered the petitioner's assets as reflected on the Schedule L balance sheet. In addition,
retained earnings are often non-cash in nature and can represent income spent on investments into the
petitioner's business as opposed to being distributed among shareholders or shown as profit. The AAO
generally won't credit monies spent during the normal course of business to be available to show the
ability to pay the proffered wage.
Finally, if the petitioner does not have sufficient net income or net current assets to pay the proffered
salary, CIS may consider the overall magnitude of the entity's business activities. Even when the
petitioner shows insufficient net income or net current assets, CIS may consider the totality of the
circumstances concerning a petitioner's financial performance. See Matter of Sonegawa, 12 I&N Dec.
612 (Reg. Comm. 1967). In Matter of Sonegawa, the Regional Commissioner considered an immigrant
visa petition, which had been filed by a small "custom dress and boutique shop" on behalf of a clothes
designer. The district director denied the petition after determining that the beneficiary's annual wage of
$6,240 was considerably in excess of the employer's net profit of $280 for the year of filing. On appeal,
the Regional Commissioner considered an array of factors beyond the petitioner's simple net profit,
including news articles; financial data, the petitioner's reputation and clientele, the number of employees,
future business plans, and explanations of the petitioner's temporary financial difficulties. Despite the
petitioner's obviously inadequate net income, the Regional Commissioner looked beyond the petitioner's
uncharacteristic business loss and found that the petitioner's expectations of continued business growth
and increasing profits were reasonable. Id. at 615. Based on an evaluation of the totality of the
petitioner's circumstances, the Regional Commissi{mer determined that the petitioner had established the
ability to pay the beneficiary the stipulated wages.
As in Matter of Sonegawa, CIS may, at its discretion, consider evidence relevant to a petitioner's
financial ability that falls outside of a petitioner's net income and net current assets. CIS may consider
such factors as the number of years that the petitioner has been doing business, the established historical
growth of the petitioner's business, the overall number of employees, the occurrence of any
uncharacteristic business expenditures or losses, the petitioner's reputation within its industry, whether
the beneficiary is replacing a former employee or an outsourced service, or any other evidence that CIS
deems to be relevant to the petitioner's ability to pay the proffered wage. In this case, however, the
petitioner has only provided four tax returns, 2001 through 2004, only one of which establishes the
petitioner's ability to pay the proffered wage of $42,000. These returns are also not enough evidence to
establish that the business has met all of its obligations in the past or to establish its historical growth. In
addition, there is no evidence of the petitioner's reputation throughout the industry.
The petitioner's 2001 tax return reflects an ordinary income or net income of $89,090 (Schedule K) and
net current assets of $169,974. The petitioner could have paid the proffered wage of $42,000 from either
its net income or net current assets in 200 I.
The petitioner's 2002 tax return reflects an ordinary income or net income of -$59,561 (Schedule K) and
net current assets of $10,393. The petitioner could not have paid the proffered wage of $42,000 from
either its net income or net current assets in 2002.
Page 9
The petitioner's 2003 tax return reflects an ordinary income or net income of -$71,292 (Schedule K) and
net current assets of -$27,418. The Petitioner could not have paid the proffered wage of $42,000 from
either its net income or net current assets in 2003.
The petitioner's 2004 tax return reflects an ordinary income or net income of -$2,314 (Schedule K) and
net current assets of -$13,020. The Petitioner could not have paid the proffered wage of $42,000 from
either its net income or net current assets in 2004.
The burden of proof in these proceedings rests solely with the Petitioner. Section 291 of the Act, 8 U.S.c.
§ 1361. The petitioner has not sustained that burden. Accordingly, the previous decision of the director will
be afftrmed, and the petition will be denied.
ORDER: The apPeal is dismissed.