Opinion ID: 203705
Heading Depth: 1
Heading Rank: 5

Heading: Financial Ability to Pay the Skilled Worker's Wage

Text: River Street's second argument on appeal is that the AAO abused its discretion by not adding depreciation to the net income reflected in its federal income tax returns. River Street stresses that prior to 2003, the AAO took into account amounts deducted for depreciation in its tax return when computing a prospective employer's financial ability to pay the proffered wage. Nevertheless, River Street acknowledges that before reaching a determination in the present case, the AAO had reversed its policy of adding depreciation back to net income when determining a prospective employer's financial ability to employ a foreign skilled worker. [6] Nevertheless, River Street argues that the AAO has been inconsistent in how it treats depreciation and, therefore, has abused its discretion in not adding back depreciation in the present case. River Street also argues that the AAO's change of policy does not warrant deference under Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-844, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), and must be evaluated under the more neutral framework delineated in Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944). [7] The government avers that the AAO's decision is entitled to Chevron deference. In Chevron, the Supreme Court held that when a statute within an agency's jurisdiction is ambiguous and the implementing agency's construction is reasonable, federal courts must accept the agency's construction of the statute. Chevron, 467 U.S. at 843-44 & n. 11, 104 S.Ct. 2778. Under this framework, unexplained inconsistency in an agency's interpretation of a statute can be a reason for holding the agency's actions to be an arbitrary and capricious change from agency practice under the APA. Nat'l Cable & Telecomms. Ass'n. v. Brand X Internet Servs., 545 U.S. 967, 981, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005). This Court cannot attempt to supply a reasoned basis for the action that the agency itself has not given. Citizens Awareness Network v. United States Nuclear Regulatory Comm'n, 59 F.3d 284, 291 (1st Cir.1995) (citing Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)). However, pursuant to Chevron, an agency's change in precedent is not invalidating if the agency adequately explains its reasons. Id. The agency's explanation must be accompanied by some reasoning that indicates that the shift is rational and, therefore, not arbitrary and capricious. Id. (internal citations omitted). [T]his is not a difficult standard to meet. Id. We have recognized that after the Supreme Court's decision in United States v. Mead Corp., 533 U.S. 218, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001), the level of deference owed to an informal agency interpretation is freighted with uncertainty. Doe v. Leavitt, 552 F.3d 75, 79 (1st Cir. 2009) (noting that Mead does not clarify the circumstance in which Congress should be deemed to have intended an informal agency interpretation to carry the force of law and thus, attract Chevron deference). Arguably, the AAO's unpublished decision may lack force and as such, Chevron deference could be inappropriate. See Mead, 533 U.S. at 221, 121 S.Ct. 2164 (holding that a tariff classification does not warrant judicial deference under Chevron because there was no indication that Congress intended such a ruling to carry the force of law); [8] Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) (finding that interpretations contained in an opinion letter, much like interpretations contained in policy statements, agency manuals, and enforcement guidelines lack the force of law and, hence, do not warrant Chevron deference). The Chevron standard was developed in the context of precedential administrative decisions, where an agency's interpretation of a statute has the force of law. [9] In the case at bar, we are dealing with an agency's change of policy in an unpublished, non-precedential decision [10] and not with an agency's precedential interpretation of a particular statute within its jurisdiction. [11] Some Circuits including this one have applied the Skidmore standard when examining non-precedential agency decisions. E.g., Leavitt, 552 F.3d at 79-80 (recognizing that if an informal agency interpretation is deemed not to warrant Chevron deference, it may nonetheless lay claim to a lesser degree of deference under the Skidmore banner); Godinez-Arroyo v. Mukasey, 540 F.3d 848, 850 (8th Cir.2008) (holding that the less deferential Skidmore standard was a more appropriate standard to be applied to an agency's unpublished opinion); Boykin v. KeyCorp, 521 F.3d 202, 208 (2d Cir.2008); Ortega-Cervantes v. Gonzales, 501 F.3d 1111, 1113 (9th Cir. 2007). Pursuant to Skidmore, an agency's interpretation is `entitled to respect' only to the extent it has the `power to persuade.' Gonzales v. Oregon, 546 U.S. 243, 256, 126 S.Ct. 904, 163 L.Ed.2d 748 (2006) (citing Skidmore, 323 U.S. at 140, 65 S.Ct. 161). Under Skidmore, the weight afforded to a judgment in a particular case will depend upon the thoroughness evident in [the agency's] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control. Skidmore, 323 U.S. at 140, 65 S.Ct. 161. Other factors may be considered when evaluating the persuasiveness of an agency's interpretation. Leavitt, 552 F.3d at 81 (noting that the list of factors stated in Skidmore is non exhaustive). Said factors include the formality of the adjudication and the agency's expertise. [12] Id. at 81-82. Contrary to River Street and the government's assertions, we find that the standard of review under which the AAO's decision not to add back depreciation should be reviewed is neither Chevron or Skidmore but the APA's arbitrary and capricious standard, i.e. whether the action was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law. 5 U.S.C. § 706(2)(a). [13] As explained above in the standard of review section, under this deferential standard, [a]n agency's determination is arbitrary and capricious if the agency lacks a rational basis for making the determination or if the decision was not based on consideration of the relevant factors. Carcieri, 497 F.3d at 43. Departure from agency precedents embodied in prior adjudicative decisions can constitute an abuse of discretion if the reasons for the failure to follow precedent are not explained. See Shaw's Supermarkets, Inc. v. NLRB, 884 F.2d 34, 37 (1st Cir.1989). Chevron and Skidmore are not applicable to the claim before us because those standards are directed at whether the agency acted within its authority-statutory or regulatory. See Arent v. Shalala, 70 F.3d 610, 615-16 (D.C.Cir.1995) (distinguishing between Chevron deference and APA's arbitrary and capricious review and explaining that while  Chevron is principally concerned with whether an agency has authority to act under a statute the question of whether the [agency's] discharge of that authority was reasonable... falls within the province of traditional arbitrary and capricious review under 5 U.S.C. § 706(2)(a)). When the question is not one of the agency's authority but of the reasonableness of its actions, the `arbitrary and capricious' standard of the APA governs. New York Public Interest Research Group v. Whitman, 321 F.3d 316, 324 (2d Cir.2003). In the present case, River Street does not contend that the AAO acted outside the scope of authority delegated to it by statute in deciding to not credit River Street for depreciation amounts deducted from its net income. There is no question that the AAO has discretion to decide how to weigh relevant evidence in assessing a prospective employer's ability to pay a proffered wage. Rather, River Street claims that in departing from its prior precedents without explanation, the AAO exercised its undisputed discretion in this area in an arbitrary and capricious manner. This type of inquiry is governed by section 706(2)(a). Whitman, 321 F.3d at 324. Moreover, this is the standard that this Court has recently applied in reviewing discretionary decisions by CIS. [14] Royal Siam Corp., 484 F.3d at 148 (holding that CIS rejection of visa renewal application was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law). Thus, we will proceed to determine whether the AAO's decision was supported by a rational basis. Bowman, 419 U.S. at 290, 95 S.Ct. 438. We conclude that it was. The AAO decision in this case adequately explained why amounts deducted for depreciation should not be added to River Street's net income. Usually, the AAO requires a prospective employer to evidence its ability to employ an alien skilled worker's wage through either copies of annual reports, federal tax returns, or audited financial statements. 8 C.F.R. § 204.5(g)(2). After examining River Street's federal income tax returns, the AAO determined that in 2001 and 2002, River Street's net income and net current assets were less than the proffered wage for Mohamed. The AAO also explained that it would not revert to its pre-2003 policy where depreciation was added to net income. The AAO recognized that a depreciation deduction is a systematic allocation of the cost of a tangible long-term asset and does not represent a specific cash expenditure during the year claimed. Furthermore, the AAO indicated that the allocation of the depreciation of a long-term asset could be spread out over the years or concentrated into a few depending on the petitioner's choice of accounting and depreciation methods. Nonetheless, the AAO explained that depreciation represents an actual cost of doing business, which could represent either the diminution in value of buildings and equipment or the accumulation of funds necessary to replace perishable equipment and buildings. Accordingly, the AAO stressed that even though amounts deducted for depreciation do not represent current use of cash, neither does it represent amounts available to pay wages. We find that the AAO has a rational explanation for its policy of not adding depreciation back to net income. Namely, that the amount spent on a long term tangible asset is a real expense. Furthermore, we find that the AAO consistently applied its position regarding depreciation. River Street concedes that beginning in 2003, the AAO no longer added amounts deducted for depreciation to net income to determine a petitioner's financial capacity to pay the proffered wage. Furthermore, River Street submitted several AAO non-precedential decisions which show that, since 2003, the AAO has consistently refused to add depreciation to net income. In addition to the AAO decisions submitted by River Street, this Court examined other AAO decisions that were issued after the 2003 change of policy. They are all consistent in that, in the usual course, depreciation is apparently no longer added to net income. E.g., 32 Immig. Rptr. B2-116 AAO Designation:B6 (Nov. 10, 2005); 33 Immig. Rptr. B2-1 AAO Designation:B6 (Sep. 16, 2005); 32 Immig. Rptr. B2-9 AAO Designation:B6 (Jan. 13, 2005); 31 Immig. Rptr. B2-8 AAO Designation:B6 (Dec. 30, 2004); 31 Immig. Rptr. B2-1 AAO Designation:B6 (Nov. 22, 2004); 28 Immig. Rptr. B2-7 (Aug. 6, 2003); 27 Immig. Rptr. B2-77 (Apr. 9, 2003); but see, e.g., 25 Immig. Rptr. B2-82 AAO Designation:B6 (May 7, 2002). These decisions lend ample support to the consistency displayed by the AAO in applying its policy regarding depreciation. In sum, since the AAO has proffered a rational reason for its reversal in policy and because it has consistently applied that policy since 2003, we see no reason to interfere with the AAO's change of policy regarding depreciation and its denial of River Street's employment based visa application.