Federal Court Invalidates Trump’s $100,000 H-1B Visa Fee as Ilegal Usurpation of Congress’ Power to Tax

Earlier today, in the case of California v. Mullin, the US District Court for the District of Massachusetts issued a decision striking down the Trump Administration’s $100,000 fee on applications for H-1B visas (which are used by tech firms, research institutions, and other organizations to hire immigrant workers and researchers with a variety of specialized skills). Judge H. Lee Sarokin ruled that the plan is illegal because it usurps Congress’s power to tax. He relies in part on the Supreme Court’s recent decision in Learning Resources, Inc. v. Trump, the tariff case I helped litigate:

The Court begins with Plaintiffs’ assertion that the Policy intrudes upon Congress’s
taxing power. The first inquiry is whether the $100,000 payment requirement constitutes a tax. The parties quibble about whether the requirement resembles a tax or a “penalty,” as characterized by two Supreme Court precedents: Bailey v. Drexel Furniture Company and National Federation of Independent Business v. Sebelius….

Here, the $100,000 payment requirement for all H-1B petitions does not aim to establish that hiring H-1B workers is illegal. The payment is not a penalty, just as the IRS fee in Sebelius was not, because it is not “punishment for an unlawful act or omission.” Id. at 567. Hiring workers pursuant to the H-1B program is plainly lawful. Of course, rendering the hiring of H-1B workers “unlawful” would eliminate the program established by Congress through the statute, which would raise a different separation-of-powers concern…

Furthermore, Defendants claim that the $100,000 payment requirement is “a regulatory
payment,” which is “not the same as a tax…”  This is mere ipse dixit. Defendants offer no definition for what constitutes “a regulatory payment,” cite no cases or statutes employing the term, and advance no reasoned argument explaining how this term encompasses something different than a tax or a penalty….

That does not end the Court’s analysis. While the Constitution exclusively vests
Congress with the “Power To lay and collect Taxes, Duties, Imposts, and Excises,” U.S. Const. art. 1, § 8, cl. 1, Congress can delegate the taxing power to the executive branch so long as it “clearly” indicates “its intention to delegate.” Skinner v. Mid-Am. Pipeline Co., 490 U.S. 212, 224 (1989). Thus, the relevant inquiry here is whether the provisions of the INA granting the President discretionary powers to regulate the entry of noncitizens reflect a delegation of Congress’s taxing power. Under INA § 212(f), the President has the authority to “impose on the entry of aliens any restrictions he may deem to be appropriate.” 8 U.S.C. § 1182(f). INA § 215(a) additionally grants the President the power to impose “reasonable rules, regulations, and orders” as well as “limitations and exceptions” to the entry of noncitizens. Id. § 1185(a)(1).

Plaintiffs argue that these provisions do not confer the power to impose taxes, relying on the Supreme Court’s recent guidance in Learning Resources. That case involved a challenge to the President’s imposition of tariffs under the IEEPA….. The
IEEPA permits the President to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any . . . importation or exploration of . . . any property in which any foreign country or a national thereof has any interest” when responding to a national emergency. Id. at 636. The Court found that the IEEPA does not delegate taxing powers to the President, noting that the specific powers listed in the IEEPA do not include “any mention of tariffs or duties.” Id. at 642. The Court further noted that the power to “regulate . . . importation” does not encompass the power to tax, because the term “regulate” “means to ‘fix, establish, or control; to adjust by rule, method, or established mode; to direct by rule to restriction; to subject to governing principles or laws'”—none of which captures the power to tax. Id. at 642-43…

Applying Learning Resources to the case at hand, the Court finds that INA §§ 212(f) and 215(a) do not delegate taxing power to the President. These sections allow the President to impose “restrictions,” “rules,” “regulations,” “orders,” “limitations,” and “exceptions” to the entry of noncitizens to the United States. Like the powers delineated in the IEEPA, none of these terms, by their ordinary meaning, include the power to tax.

I agree with the court’s analysis, and am glad the tariff case turned out be a useful precedent here. The court also ruled the imposition of the $100,000 fee violates the Administrative Procedure Act.

I have previously criticized the $100,000 H-1B fee on both legal and policy grounds here, here, and here.

Obviously, today’s decision will almost certainly be appealed, and the legal battle will continue. But, especially after Learning Resources, I am guardedly hopeful the various groups challenging the fee will prevail.