The Department of Homeland Security overestimated by $6.1 billion the annual revenue it would receive by imposing a $103,265 fee on H-1B cap-subject petitions, according to a new analysis. The finding matters because it could contribute to a federal judge vacating the proposed rule for violating the Administrative Procedure Act. Federal agencies must responsibly consider significant problems raised by regulatory action. Administration critics believe the rule’s purpose is not, as DHS asserts, to raise revenue to fund immigration functions but to impose a tax that restricts the employment of highly skilled foreign nationals.

On August 25, the Trump administration proposed a $103,265 tax on all petitions subject to the H-1B annual limit in an immigration rule . The rule was similar to a presidential proclamation in Sept. 2025 that imposed a $100,000 fee on the entry of new H-1B visa holders. In June, a federal judge struck down that fee, calling it an intrusion on Congress’s taxing authority.

On Sept. 18, the White House posted a presidential proclamation that extended for another year the $100,000 fee levied on the entry of new H-1B professionals. Administration officials may have wanted to preserve their legal options. The proclamation revealed that the Sept. 2025 $100,000 fee acted as a virtual prohibition on hiring new H-1B visa holders, with employers making the $100,000 payment for only about 700 individuals. Analysts note there is little reason to expect employers will clamor to make an even larger payment instead of expanding hiring outside the United States at foreign affiliates and elsewhere.

H-1B temporary visas are often the only way for high-skilled foreign nationals to work in the United States long term. Employers must pay the higher of the actual or prevailing wage paid to U.S. professionals with similar experience and qualifications. Companies recruiting at U.S. universities find that international students make up about 75% to 80% of full-time graduate students in AI-related fields, such as computer and information sciences.

The proposed rule is more expansive than the Sept. 2025 proclamation because the new $103,265 tax on H-1B petitions applies to individuals in or out of the United States. The Sept. 2025 proclamation only applied to new H-1B visa holders outside the United States. The H-1B annual limit (or cap) is 65,000 plus a 20,000 exemption for foreign nationals with an advanced degree from a U.S. university.

An Analysis Of The Immigration Rule Finds A Significant Revenue Shortfall

In its summary of the proposed rule, DHS justified the fee by asserting it would still result in 85,000 cap-subject H-1B petitions and that a $103,265 payment would thereby raise $8.8 billion annually. If DHS overstated the revenue raised, it would show DHS failed to consider the problem caused by the high H-1B fees. It would also show the Trump administration was not trying to raise money to fund immigration functions at various federal agencies, but to impose a tax without Congressional approval that restricts immigration.

A new National Foundation for American Policy analysis , included in a comment to the proposed rule, finds DHS significantly overestimated the revenue it would receive after imposing a high H-1B fee. “NFAP calculates that the $103,265 fee would raise not $8.8 billion but only $2.6 billion, 70% less than DHS claimed,” according to its comment and analysis.

“That would be ‘an important aspect of the problem’ under the State Farm case,” said Jonathan Wasden of Wasden Law in an interview. “Failure to consider it or adequately address such a colossal problem would likely lead the court to vacate the rule.”

Motor Vehicle Manufacturers Association of the United States, Inc. v. State Farm Mutual Automobile Insurance Co. , often referred to as State Farm, is a Supreme Court case decided in 1983 that helped define the limits of federal regulatory actions. The Supreme Court ruled that the National Highway Traffic Safety Administration violated the Administrative Procedure Act because its action was “arbitrary and capricious; the agency failed to present an adequate basis and explanation.”

“NFAP arrived at this estimate after accounting for the 91.2% reduction in consular Initial Form I-129 H-1B petitions compared to the same period in the previous year after the Trump administration imposed a $100,000 fee in September 2025 and the additional revenue lost from other H-1B-related fees due to the far lower number of registrations and initial H-1B petitions caused by the $103,265 fee,” according to the analysis.

NFAP used DHS’s 91.2% decline in filings to calculate what that means for the proposed rule. In the FY 2026 cap season, there were 343,981 eligible registrations, according to USCIS, which means a reduction of 91.2% would result in 30,270 H-1B cap-subject petitions, or 54,730 fewer than the 85,000 H-1B annual limit . Note that DHS relegated the 91.2% decline to a technical appendix and did not mention it in the discussion of the proposed rule in the Federal Register.

DHS insisted in the proposed rule that it could increase the cost of new H-1B petitions by $103,265 and still produce $8.8 billion in revenue annually because employers would not change their behavior significantly despite the higher cost. DHS estimated the impact of a small fee increase in a 2024 report that suggested that increasing fees leads to increased applications, thereby supporting its conclusion that the $103,265 H-1B fee would not significantly affect employers.

“It’s not responsible to look at small changes in fees when trying to predict the effects of large fee changes, such as introducing a $103,265 fee that is more than 100 times larger than the small fee changes DHS examined and cites in the rule. It’s invalid to use the estimate that way,” said Mark Regets, a labor economist and NFAP senior fellow, in an interview.

DHS states that USCIS will receive at least 85,000 H-1B registrations or petitions, despite the $103,265 fee, and that the rule relies upon meeting that 85,000 target: “However, the success of the USCIS fee model and this rulemaking in generating the necessary revenue depends on the filing volumes of cap-subject H-1B petitions not falling short of those projected herein.”

Other Issues With The Immigration Rule

Commenters are likely to raise other issues with the rule. “Opponents will argue that this still looks less like paying for an H-1B adjudication and more like using a tax to finance broader government operations,” said Jeff Robins, a senior counsel at BAL, in an interview after the proposed rule was published. “Combined with ongoing USCIS backlogs and questions about how existing fee revenue is being used, that argument is likely to feature prominently both in public comments and in any lawsuit challenging a final rule.” In June, U.S. District Court Judge Leo T. Sorokin wrote that Supreme Court precedents supported “a finding that the $100,000 payment requirement amounts to a tax, not a penalty.”

The fee also implies a potential sea-change in U.S. immigration policy. “Based on the reasoning in the proposed rule, if it stands, DHS argues it could set a fee of $1 million or $10 million on applications in every immigration category, temporary or permanent, to raise revenue and thereby enact a moratorium on all forms of immigration to the United States. That would nullify nearly all laws Congress has passed related to legal immigration,” according to the NFAP comment.

DHS cited a study by Harvard University economist George Borjas, who asserted that because “On average, H-1B workers earn 16% less than comparable natives,” it suggested companies would pay a $100,000 fee. Several economists have pointed to significant flaws in the Borjas paper.

However, NFAP notes an additional issue with DHS citing the Borjas paper: “DHS is asking for permanent authority to impose a $103,265 H-1B fee based crucially on a study that alleges H-1B visa holders earn 16% less than comparable natives, even though the Labor Department will soon publish a final rule that eliminates the alleged underpayment, thereby ending the incentive that DHS relies upon to argue that employers will pay a $103,265 fee.”

DOL’s proposed rule raises the required salary for H-1B visa holders and employment-based immigrants by an average of 33% for Level I, 24% for Level II, 21% for Level III and 22% for Level IV.

The National Foundation for American Policy estimates that USCIS is unlikely to receive close to 85,000 H-1B registrations or petitions, leaving DHS more than $6 billion short of its revenue estimate in the proposed rule. The NFAP revenue estimate could be considered conservative because the presidential proclamation issued Sept. 18, 2026, stated that only a little over 700 individuals found employers willing to pay the $100,000 H-1B fee, a number far lower than the NFAP estimate of 30,270 H-1B petitions.

Another immigration policy reason to expect H-1B filings to decline is the Trump administration’s proposed changes. The Trump administration has proposed more than half a dozen new rules that will likely discourage employers from hiring highly skilled individuals and deter international students and others from building their careers in America.