Immigration Policy for Intracompany Transfers (L Visa): Issues and Legislation
Released: 2006-05-15T00:00:00

Background

Overview of Nonimmigrants

Foreign nationals may be admitted to the United States temporarily or may come to livepermanently. Those admitted on a permanent basis are known as immigrants or legal permanentresidents (LPRs), while those admitted on a temporary basis are known as nonimmigrants. (1) Nonimmigrants include awide range of people, such as tourists, foreign students, diplomats, temporary agricultural workers,exchange visitors, internationally known entertainers, foreign media representatives, businesspersonnel, and crew members on foreign vessels. Most of these nonimmigrant visa categories aredefined in Â§101(a)(15) of the Immigration and Nationality Act (INA). These visa categories arecommonly referred to by the letter and numeral that denotes their subsection in Â§101(a)(15), forexample, B-2 tourists, E-2 treaty investors, F-1 foreign students, and H-1B temporary professionalworkers. Intracompany transferees who work for an international firm or corporation in executiveand managerial positions or have specialized product knowledge are admitted on the L-1 visas. Their immediate family (spouse and minor children) are admitted on L-2 visas.

Legislative History of L Visa

Congress established the L visa in 1970 largely in response to unintended consequences ofthe Immigration Amendments of 1965 that made multinational corporations unable to transfertop-level personnel to offices in the United States as easily as they had prior to the implementationof the 1965 Immigration Amendments. Because many of the employees that firms sought to bringinto the United States were not intending to stay in the United States and were likely to be transferredabroad in a few years, Congress opted to create a nonimmigrant (i.e., temporary) category for alienswho performed in managerial/executive capacity or who had specialized knowledge. These alienshad to have been employed in that capacity by that firm for at least one year prior to seeking the Lvisa. (2)

As part of the Immigration Amendments of 1990, Congress made several changes to the Lvisa category, most notably clarifying that specialized knowledge meant specialized knowledge ofthe firm's product. Congress placed time limits on the L visas, allowing managers and executivesholding L visas to stay for up to seven years and those having specialized product knowledge to stayfor up to five years. Congress also amended the INA to permit aliens with L visas to petition tobecome LPRs, allowing for what is known as "dual intent" in immigration policy. (3) In the 1990 Act, Congressfurther added managers and executives to the priority worker (also known as first preference)category of employment-based LPR admissions, facilitating the adjustment of L nonimmigrants toLPR status. (4)

The 107th Congress enacted a change to the INA that reduced the length of time an L-1 wouldhave to work for certain multinational firms abroad from one year to six months prior to transferringto a U.S. location. This legislation also amended the INA to permit the spouses of L-1nonimmigrants (i.e., L-2 nonimmigrants) to work while they are in the United States. (5)

During the 108th Congress, Title IV of P.L. 108-447 , the Consolidated Appropriations Actfor FY2005, included a provision that renders ineligible for L visa status those aliens who serve ina capacity involving specialized knowledge at the worksite of an employer other than the petitioningemployer or its affiliate if (1) the alien will be controlled principally by the unaffiliated employer;or (2) the placement with the unaffiliated employer is part of an arrangement merely to provide laborrather than to use the alien's specialized knowledge. It also added a provision that requires theSecretary of Homeland Security to impose a fraud prevention and detection fee of $500 on H-1B(foreign temporary professional workers) and L (intracompany business personnel) petitioners. (6)

Trends

The number of L visas issued has increased by 363.5% over the past 25 years. The U.S.Department of State (DOS) issued only 26,535 L visas in FY1980. L visa issuances began increasingin the mid-1990s and peaked at 122,981 in FY2005, as Figure 1 depicts. Typically, over half of theL visas issued any given year are L-1 visas to the individual qualifying as an intracompany transfer,and the remainder are immediate family coming on L-2 visas. Of the 122,981 L visas issued inFY2005, a total of 65,458 are L-1 visas for the qualifying (principal) nonimmigrant.

Figure 1. Intracompany L Visas Issued, FY1980 to FY2005

The country sending the most intracompany transfers in FY2005 was India, as Figure 2 illustrates. Almost two-thirds (39,849 or 32.4%) of the 122,981 L visas were issued to aliens fromIndia in FY2005. Great Britain (including Northern Ireland) and Japan followed with 12,869 (10.5%)and 11,998 (9.8%) respectively of all L visas issued. Figure 2 depicts the top 10 countries that arethe source country for L nonimmigrants in FY2005, and these 10 countries comprise 74.9% of allL visas issued in FY2005. Canadians coming as intracompany transfers are not required to have Lvisas to enter the United States, according to longstanding agreements with Canada.

Data on the number of L nonimmigrants who enter the United States, according to statisticalreports of the Department of Homeland Security (DHS) Office of Immigration Statistics, evidencea growth pattern steeper than the number of visas issued by DOS. The admission of Lnonimmigrants grew sixfold over the past 24 years, from 65,044 in FY1981 to 102,555 in FY1990to 456,583 in FY2004. When the analysis is limited to L-1 visa holders, the number of admissionshas grown from 63,180 in FY1990 to 314,484 in FY2004, an increase of almost 400% in 14 years. These admissions data, however, include multiple entries by the same person over the course of afiscal year. Given the purpose of their visas, L nonimmigrants may travel back and forth from theUnited States more than once a year for business. A comparison of the admission data with the visaissuance data suggest that not only have the number of L visa holders increased, but these L visaholders travel abroad more frequently now than a decade ago.

Figure 2. Top Ten Source Countries for L Visas in FY2005

Procedures

A firm or corporation that seeks to have an L-1 nonimmigrant enter the United States mustfile an I-129 petition with the United States Citizenship and Immigration Services (USCIS) in theDHS, and may file blanket petitions under specified circumstances. (7) Once the employer's petitionis approved, the alien residing abroad applies for a visa with the DOS Bureau of ConsularAffairs. (8) The DOSconsular officer, at the time of application for a visa, as well as the DHS immigration inspectors, atthe time of application for admission, must be satisfied that the alien is entitled to a nonimmigrantstatus. (9)

The prospective L nonimmigrant must demonstrate that he or she meets the qualificationsfor the particular job as well as the visa category. The alien must have been employed by the firmfor at least six months in the preceding three years in the capacity for which the transfer is sought. The alien must be employed in an executive capacity, a managerial capacity, or have specializedknowledge of the firm's product to be eligible for the L visa. (10) The INA does not requirefirms who wish to bring L intracompany transfers into the United States to meet any labor markettests (e.g., demonstrate that U.S. employees are not being displaced or that working conditions arenot being lowered) in order to obtain a visa for the transferring employee. (11)

For employers to sponsor LPRs who are members of the professions holding advanceddegrees, persons of exceptional ability, skilled workers with at least two years training, professionalswith baccalaureate degrees, and unskilled workers or to hire H nonimmigrants as temporary workers,they must demonstrate that U.S. workers are not adversely affected by the hiring of these foreignworkers. To do so, the employer who seeks to hire a prospective foreign worker petitions with theUSCIS and the Employment and Training Administration (ETA) in Department of Labor(DOL). (12)

While working in the United States, L visa holders are generally required to pay federalincome taxes, provided they meet the "substantial presence test" that determines whether the foreignnational is considered a resident alien for tax purposes. (13) Moreover, L visa holders are not exempt from the requirementsto pay Social Security and Medicare (often referred to as FICA) taxes on compensation from workwithin the United States. (14) Tax treaties, however, may override the resident alien tax rulesin limited instances, especially with respect to double taxation of earnings. If a nonimmigrant isdefined as a resident of a foreign country under a tax treaty, then he or she is a nonresident alienregardless of whether the substantial presence test is met. (15)

Current Issues

Effects on U.S. Personnel

Some are arguing that foreign managers and specialized personnel should not be brought intothe United States if there are qualified U.S. managers and specialized personnel currently in thatposition or in that local labor market. Some of those advocating reform maintain that L-1 visasshould be limited to only top-level executives of multinational firms and that mid-level managersand specialized personnel should be admitted only after a determination that comparable U.S.personnel are not adversely affected. Some argue that the L-1 visa currently gives multinationalfirms an unfair advantage over U.S.-owned businesses by enabling multinational corporations tobring in lower-cost foreign personnel.

Supporters of current law argue that it is essential for multinational firms to be able to assigntop personnel to facilities in the United States on an "as needed basis" and that it iscounterproductive to have government bureaucrats delay these transfers to perform labor markettests. They warn these multinational firms will find it too burdensome and unprofitable to dobusiness in the United States. Some point out that U.S. corporations who do business abroad mightwell lose the reciprocal benefit of transferring top U.S. personnel overseas if restrictions are addedto the L visa.

Alternative to H-1B Visa

There have been a series of media reports that firms are opting to bring in foreignprofessional workers on L-1 visas rather than the H-1B visa for professional specialty workers. (16) Critics cite the law onH-1B visas in which employers seeking to hire H-1B nonimmigrants must attest to the DOL that theyare paying the foreign workers the same wages as similarly employed U.S. workers and that havenot laid off U.S. workers 90 days before or after hiring the H-1B. (17) Some are asserting thatcertain employers are "end running" the labor attestation requirements of the H-1B visa byexaggerating the specialized product knowledge of their professional workers so that they qualifyfor an L visa and that some firms are bringing in L-1 nonimmigrants expressly to "outsource" themto other firms. Advocates of reforming current law warn that the L visa is replacing the H-1B visafor information technology positions and that L admissions will soar in numbers because H-1Badmissions are numerically limited. (18)

Supporters of current law assert that intracompany transfers are essential personnel that donot need to be subjected to the labor market tests designed for foreign workers filling "rank and file"positions. They maintain that corporate flexibility and control on issues of staffing top-levelmanagement are essential to success. They warn that labor attestation for L visas would make itmore costly and time-consuming to do business in the United States, reducing investment in theUnited States and ultimately resulting in multinational firms moving jobs off shore. Some observethat L-1 employees do not technically constitute new hires who could displace U.S. workers; theymaintain instead that the L-1 employee is being transferred temporarily within the firm to add valueor provide expertise based on their international experience with the firm. (19)

Inclusion in Free Trade Agreements

Critics of current law on L visas are concerned that free trade agreements retain the currentlanguage on L visas and would bar the United States from statutory changes to L visas as well asother temporary business and worker nonimmigrant categories. For example, the U.S.-SingaporeFree Trade Agreement states that the United States shall not require labor certification or othersimilar procedures as a condition of entry and shall not impose any numerical limits on intracompanytransfers from Singapore. (20) Similar language is also in the U.S.-Chile Free TradeAgreement. (21)

Proponents of these trade agreements point out that they are merely reflecting current law andpolicy and that such agreements on the flow of business people and workers are essential to U.S.economic growth and business vitality. The House passed H.R. 2738 and H.R. 2739 , legislation that respectively would implement the Chile and SingaporeFTAs, on July 24, 2003. The Senate followed, passing the implementing language for both FTAson July 31, 2003.

The North American Free Trade Agreement (NAFTA) has immigration provisionsconcerning intracompany transferees similar to the Chile and Singapore FTAs. NAFTA requires thethree signatory countries -- Canada, Mexico, and the United States -- to grant temporary entry tobusiness persons employed by a foreign enterprise who seek to render services to that enterprise orits affiliate or subsidiary, in a capacity that is managerial, executive or that involves specialknowledge. These intracompany transferees must have worked continuously for one year out of thepast three in a foreign country for the same firm that they are seeking to serve in the United States. No party to NAFTA may impose numerical limits or labor market tests as a condition of entry forintracompany transferees. (22)

Negotiators for the Uruguay Round Agreements of the General Agreement on Trade andTariffs (GATT), completed in 1994 and known as the General Agreement on Trade in Services(GATS), included very specific language on "intra-corporate transfers." (23) This language is similarbut not identical to the definitions of intracompany transferee found in the regulations governing theL visa. (24)

Given the issues being raised about the L visa, some are concerned that these tradeagreements constrain Congress as it considers revisions of immigration law and policy on the L visa. Since the GATS and FTAs provide specific definitions of intracompany transferees, prohibit laborcertification or similar labor condition tests for intracompany transferees, and prohibit numericallimits on intracompany transferees, some of the options being considered in legislation discussedbelow, if enacted, may violate GATS or the FTAs. (25)

Visa Abuses

The DHS Office of the Inspector General (OIG) examined the potential vulnerabilities andabuses in the L-1 visa at the request of Congress. (26) The DHS OIG issued a report in January 2006 that reached thefollowing conclusions about the L visa:

The visa allows for the transfer of managers and executives, but adjudicatorsoften find it difficult to be confident that a firm truly intends to use an imported worker in such acapacity.

The visa allows for the transfer of workers with "specialized knowledge," butthe term is so broadly defined that adjudicators believe they have little choice but to approve almostall petitions.

The transfer of L-1 workers requires that the petitioning firm is doing businessabroad, but adjudicators in the United States have little ability to evaluate the substantiality of theforeign operation.

The visa encompasses petitioners who do not yet have, but are merely in theprocess of establishing, their first U.S. office.

The visa permits petitioners to transfer themselves to the UnitedStates.

The DHS OIG also found that "though the L-1 visa program is not specifically tailored for thecomputer or information technology (IT) industries, the positions L-1 applicants are filling are mostoften related to computers and IT. From 1999 to 2004, nine of the ten firms that petitioned for themost L-1 workers were computer and IT related outsourcing service firms that specialize in laborfrom India." (27)

In this 2006 report, the DHS OIG made three recommendations: (1) establish a procedure toobtain overseas verification of pending H and L petitions; (2) explore whether ICE Visa SecurityOfficers abroad could assist in checking L petitions in the countries where the ICE officers areassigned; and (3) seek legislative clarification on the concepts of manager and executive and the term"specialized knowledge." (28)

Legislation

Activity in the 108th Congress

On May 19, 2003, Representative John Mica introduced H.R. 2154 , whichwould have amended the INA to prevent an employer from placing a nonimmigrant who is anintracompany transfer with another firm. H.R. 2154 would have required the employer tofile with DOL an application stating that the employer will not place the L-1 nonimmigrant withanother firm where the nonimmigrant performs duties (in whole or in part) at one or more work sitesowned, operated, or controlled by the other firm. H.R. 2154 is aimed at prohibiting theoutsourcing of L-1 visa holders.

Representative Rosa DeLauro introduced the L-1 Nonimmigrant Reform Act( H.R. 2702 ) on July 10, 2003, which would have amended the INA to require employersof L-1 visa holders to submit labor condition applications attesting that the employer is offeringcomparable wages, that the conditions of other workers will not be adversely affected, that there isno strike or lockout, and that U.S. workers were not laid off 180 days prior and would not be laid off180 days after the hiring of the L visa holder. H.R. 2702 also would have prohibited theemployer from outsourcing, leasing, or otherwise contracting for the placement of the L visa holderwith another firm. The bill further would have given DOL authority to investigate complaints madeagainst a firm hiring L visa holders, and would establish fines and penalties for violators. Many ofthese attestation requirements were comparable to the requirements for the H-1B visa.

On July 24, 2003, Senator Christopher Dodd and Representative Nancy Johnson introducedthe USA Jobs Protection Act of 2003 ( S. 1452 / H.R. 2849 ), which wouldhave made several changes to current law on L visas. Foremost, S. 1452/H.R.2849 would have added labor attestation requirements to the L visa, would have hadlay-off protections for U.S. workers employed by firms using L visas, would have restricted theoutsourcing of L-1 visa holders to other firms, would have given DOL authority to investigatecomplaints, and would have authorized DOL to assess a fee to process the application. Morespecifically, S. 1452/H.R. 2849 would also have required -- only in the case ofthe specialized knowledge provision of the L-1 visa -- that the employer, prior to filing the petition,file with DOL an application stating that the employer has taken good faith steps to recruit (usingprocedures that meet industry-wide standards) U.S. workers for the jobs for which the L-1nonimmigrants are sought. Among other provisions, S. 1452/H.R. 2849 wouldhave reduced by two years the total time an L visa holder could remain in the United States. S.1452/H.R. 2849 also would have revised the law on H-1B visas.

Senator Saxby Chambliss, then-chair of the Senate Judiciary Subcommittee on Immigration,Border Security, and Citizenship, introduced legislation entitled the L-1 Visa (IntracompanyTransferee) Reform Act of 2003 ( S. 1635 ), on September 17, 2003. This bill wouldhave amended the INA so that L-1 visa holders entering through the specialized knowledge provisionmust be controlled and supervised by petitioning employer, or its affiliate, subsidiary or parentcompany. It also would have made the placement of a prospective L-1 nonimmigrant enteringthrough the specialized knowledge provision ineligible for the visa if the placement of the alien ata work site that was unaffiliated with the petitioning employers was merely to provide labor for thatunaffiliated employer. S. 1635 would have reinstated the one-year period of continuousemployment abroad that had been reduced to six months by P.L. 107-125 .

The Save American Jobs Through L Visa Reform Act of 2004 ( H.R. 4415 )would have eliminated "specialized knowledge" as a basis for obtaining an L (intracompanytransferee) nonimmigrant visa and would have imposed an annual numerical limitation of 35,000on the number of L visas that may be issued to principal aliens. As introduced by RepresentativeHenry Hyde, H.R. 4415 also would have removed L nonimmigrants from those classes ofaliens that are not presumed to be immigrants under Â§214(b).

Representative Lamar Smith introduced H.R. 4166 , the American WorkforceImprovement and Jobs Protection Act, which would have required the Secretary of HomelandSecurity to impose a fraud prevention and detection fee on H-1B or L (intracompany businesspersonnel) petitioners for use in combating fraud and carrying out labor attestation enforcementactivities. It also would have rendered ineligible for L visa status those aliens who serve in a capacityinvolving specialized knowledge at the worksite of an employer other than the petitioning employeror its affiliate if (1) the alien will be controlled principally by the unaffiliated employer; or (2) theplacement with the unaffiliated employer is part of an arrangement merely to provide labor ratherthan to use the alien's specialized knowledge. Additionally, it would have eliminated the currentreduction in the continuous employment requirement for aliens seeking L visa status pursuant to anemployer's blanket petition. H.R. 4166 was introduced on April 2, 2004.

On July 29, 2003, the Senate Committee on the Judiciary Subcommittee on Immigration helda hearing titled "The L1 Visa and American Interests in the 21st Century Global Economy." (29) The House Committee onInternational Relations held a hearing on "L Visas: Losing Jobs Through Laissez-Faire Policies?"on February 4, 2004. (30)

L Visa Reform and Fraud Prevention. Provisionsof H.R. 4166 were incorporated into Title IV of P.L. 108-447 , the ConsolidatedAppropriations Act for FY2005. Specifically, it states that an alien is ineligible for an L visa if

(i) the alien will be controlled and supervised principally by such unaffiliated employer; or (ii) the placement of the alien at the worksite of the unaffiliatedemployer is essentially an arrangement to provide labor for hire for the unaffiliated employer, ratherthan a placement in connection with the provision of a product or service for which specializedknowledge specific to the petitioning employer is necessary. (31)

The act also requires the Secretary of Homeland Security to impose a fraud prevention anddetection fee of $500 on H-1B (foreign temporary professional workers) and L (intracompanybusiness personnel) petitioners. The act requires that the H-1B and L fraud prevention and detectionfee be divided equally among DHS, the DOS and DOL for use in combating fraud in H-1B and Lvisa applications with DOS, investigating H-1B and L petitions with USCIS, and carrying out DOLlabor attestation activities. (32)

Activity in the 109th Congress

L Visa Reform. The Comprehensive ImmigrationReform Act ( S. 2611 / S. 2612 ) includes a substantial revision of the lawon L visas. Most importantly, Â§411 of S. 2611/S. 2612 would add certainrequirements for L visa applicants seeking to come to the United States to work in new or unopenedfacilities and would expand the staffing resources of DHS, DOS, and DOL to investigate abuses andenforce violations of the L visa. The identical language was introduced by Senator Specter (S.2611) and Senator Hagel (S. 2612) and is expected to be debated on the Senatefloor before the Memorial Day recess. (33)

Representative Nancy Johnson has introduced the USA Jobs Protection Act of 2005( H.R. 3322 ), which would do the following: add labor attestation requirements to theL visa, enact lay-off protections for U.S. workers employed by firms using L visas, restrict theoutsourcing of L-1 visa holders to other firms, give DOL authority to investigate complaints, andauthorize DOL to assess a fee to process the application. More specifically, H.R. 3322would require -- only in the case of the specialized knowledge provision of the L-1 visa -- that theemployer, prior to filing the petition, file with DOL an application stating that the employer hastaken good faith steps to recruit (using procedures that meet industry-wide standards) U.S. workersfor the jobs for which the L-1 nonimmigrants are sought.

Representative Rosa DeLauro has introduced the L-1 Nonimmigrant Reform Act( H.R. 3381 ), which would amend the INA to require employers of L-1 visa holders tosubmit labor condition applications attesting that the employer is offering comparable wages, thatthe conditions of other workers will not be adversely affected, that there is no strike or lockout, andthat U.S. workers were not laid off 180 days prior and would not be laid off 180 days after the hiringof the L visa holder. H.R. 3381 also would prohibit the employer from outsourcing,leasing, or otherwise contracting for the placement of the L visa holder with another firm. The billfurther would give DOL authority to investigate complaints made against a firm hiring L visaholders, and would establish fines and penalties for violators. Additionally, H.R. 3381would establish an annual 35,000 L-1 visa limit, eliminate L-1 blanket visa authority, and require(1) an L-1 worker to have a bachelor's degree or higher in his or her area of special knowledge; and(2) verification by the Secretary of State.

L Visa Fees. The House Committee on theJudiciary Chairman James Sensenbrenner has introduced H.R. 3648 , which wouldimpose additional fees with respect to immigration services for L visa intracompany transferees. More specifically, H.R. 3648 would require the Secretaries of State and Homeland Securityto each charge additional fees of $1,500 to employers filing for visa applications and nonimmigrantpetitions for L visas. The House Committee on the Judiciary ordered H.R. 3648 reportedon September 29, 2005. These provisions were included in Title V of H.R. 4241 , theDeficit Reduction Act of 2005, which the House passed on November 18, 2005.

On October 20, 2005, the Senate Committee on the Judiciary approved compromise languagethat would raise the minimum fee for L-1 visas by $750, to a total of $1,440. This language wasforwarded to the Senate Budget Committee for inclusion in the budget reconciliation legislation. On November 18, 2005, the Senate passed S. 1932 , the Deficit Reduction OmnibusReconciliation Act of 2005, with these provisions as Title VIII.

The conference report ( H.Rept. 109-362 ) on S. 1932 , which was renamed theDeficit Reduction Act of 2005, was reported on December 19 (during the legislative day ofDecember 18). It did not include the Senate provisions that would recapture H-1B visas unused inprior years. On December 19, the House agreed to the conference report by a vote of 212-206. OnDecember 21, the Senate removed extraneous matter from the legislation pursuant to a point of orderraised under the "Byrd rule," and then, by a vote of 51-50 (with Vice President Cheney breaking atie vote), returned the amended measure to the House for further action.