Immigration Law
Short Answer: Yes. A small business can establish ability to pay for an EB-3 petition even with modest or negative reported income. Under 8 CFR 204.5(g)(2), the employer must show it could pay the proffered wage from the PERM priority date until the worker obtains permanent residence. USCIS generally looks first at wages already paid to the worker and then at the employer’s net income or net current assets. When those figures do not establish ability to pay, USCIS may consider the totality of the employer’s circumstances under Matter of Sonegawa, 12 I&N Dec. 612 (Reg. Comm. 1967). A single year showing a loss does not end the analysis.
A business owner sits across from me with a tax return showing an ordinary loss and asks whether there's any point in continuing. There usually is.
The assumption behind the question is that USCIS reads one number off one line and stops. It doesn't. The regulation contemplates a broader record than most employers realize, and the difference between an approval and a denial for a small company is frequently a documentation problem rather than a financial one.
Any EB-3 petition supported by a job offer must be accompanied by evidence that the sponsoring employer can pay the proffered wage. The obligation is continuous: 8 CFR 204.5(g)(2) requires the employer to demonstrate that ability as of the priority date and continuing until the worker becomes a permanent resident.
That timing catches employers off guard. The relevant period does not begin when you file Form I-140. In a PERM-based EB-3 case, it generally begins on the priority date — ordinarily the date the labor certification application was accepted for processing — and continues forward.
The regulation permits three forms of initial evidence: annual reports, federal tax returns, or audited financial statements. For privately held companies, an audited financial statement generally requires an independent accountant’s examination and opinion — something most small businesses have never commissioned. That leaves federal tax returns as the practical route, and in my filings they are non-negotiable. Tax returns go in every package, along with a profit-and-loss statement for the current year.
Employers with 100 or more workers get an easier path: a statement from a financial officer may be accepted. If you are reading this article, that provision probably doesn't apply to you.
USCIS generally evaluates an employer’s ability to pay through several recognized measures. The framework below shows how those measures typically come into play.
If the sponsoring employer has already paid the beneficiary at or above the proffered wage during the relevant years, that alone can establish ability to pay for those years. This is the cleanest route available, and it's why sponsoring someone already on your payroll is structurally easier than sponsoring a worker abroad.
Where the employer paid something less than the proffered wage, USCIS looks at the shortfall rather than the full wage. Only the difference needs to be covered.
Net income is determined from the appropriate income figure on the employer’s federal tax return. For an S corporation, USCIS generally looks to the ordinary business income or loss reported on Form 1120-S. Net current assets means current assets minus current liabilities, drawn from the balance sheet on the return.
Either figure can satisfy the requirement independently. USCIS does not add them together, and the agency treats them differently when a partial year is at issue: net income covers a period and is prorated, while net current assets are a snapshot on a fixed date and are not.
One wrinkle matters specifically for small companies. An S corporation with both total receipts and year-end total assets below $250,000 generally is not required to complete Schedule L, the balance sheet portion of Form 1120-S. If Schedule L is left blank, USCIS cannot determine the company’s net current assets from the tax return itself. That can leave a genuinely solvent small business without one of the clearest tax-return-based ways to demonstrate ability to pay unless the missing financial picture is established through other competent financial evidence.
For a small employer whose tax return does not establish ability to pay through the usual metrics, this broader analysis can become critical — and it is often the part of the filing that receives the least preparation. The governing authority is Matter of Sonegawa, 12 I&N Dec. 612 (Reg. Comm. 1967), which recognized that a single unprofitable year does not necessarily reflect a business’s capacity to pay a wage.
An EB-3 petition can be approved even when the sponsoring employer’s return shows negative ordinary business income. I have obtained approvals for companies in exactly that position, where wages already being paid to the beneficiary and the company’s broader documented financial circumstances supported the ability-to-pay showing.
Here is the part that requires precision, because a great deal of published guidance gets it wrong. Depreciation is a non-cash expense — it reduces reported income without representing a corresponding cash outflow during that period. But you cannot simply add depreciation back to net income and present the higher figure to USCIS.
That argument has been rejected. In River Street Donuts, LLC v. Napolitano, 558 F.3d 111 (1st Cir. 2009), the First Circuit held that USCIS did not abuse its discretion by declining to add an employer's depreciation deductions back to net income. Chi-Feng Chang v. Thornburgh, 719 F. Supp. 532 (N.D. Tex. 1989), reached the same conclusion, and AAO decisions cite both routinely.
The correct use of depreciation is explanatory, not arithmetic. It belongs in the totality-of-the-circumstances layer, where it explains why a paper loss is not a cash loss — supported by evidence of the cash that actually existed. Framed as an adjustment to the net income figure, the argument fails. Framed as context for a documented financial position, however, it can help explain why the tax return does not tell the whole story.
For most small privately held employers, federal tax returns are the practical starting point for proving ability to pay, but they were never designed to answer the question USCIS is asking. A tax return is optimized to report taxable income for a completed year. Ability to pay is a question about capacity — a different question, over a different timeframe.
The regulation itself anticipates this. After listing the three required forms of initial evidence, 8 CFR 204.5(g)(2) provides that in appropriate cases additional evidence such as profit and loss statements, bank account records, or personnel records may be submitted by the petitioner or requested by USCIS.
That clause is an invitation, and I use it. A letter from the company's accountant explaining the financial picture, bank statements showing the year-end cash balance, and a current-year profit-and-loss statement turn a bare return into an argument.
One caution on bank statements: bank records submitted without explanation of what they add may carry limited weight. A bank balance on a particular date does not necessarily establish that the funds were available to pay the proffered wage, and cash reflected in bank records may already be included among the company’s current assets. Bank statements are therefore most useful when they are presented as part of a coherent financial record rather than as a substitute for the required evidence.
The most common problem in small-business EB-3 petitions is not a weak company. It is a tax return prepared without any awareness that a federal agency will read it as proof of financial capacity.
Tax planning and immigration planning do not always point in the same direction. Legitimate deductions and accelerated depreciation may reduce the net income figure USCIS examines even when the business remains financially healthy. Owner distributions can affect the company’s available assets and overall financial picture, but they do not ordinarily reduce an S corporation’s ordinary business income simply because a distribution was made. Nobody is doing anything improper. The problem is that decisions made entirely for tax or business reasons may later affect how USCIS evaluates the company’s ability to pay.
The related mistake is memory. Employers forget which workers they have already sponsored, sometimes across multiple years and multiple filings, and the financial picture they present to USCIS reflects only the petition in front of them.
The practical fix is a conversation with your accountant before the year closes, not after the request for evidence arrives. Once the return is filed, your options narrow considerably.
An employer with multiple employment-based immigrant petitions may have to demonstrate its ability to pay the proffered wages of multiple beneficiaries during overlapping periods. USCIS can consider the employer’s obligations to other sponsored workers when evaluating whether the employer had sufficient financial capacity for the petition before it. I have received requests for evidence from USCIS asking for exactly that — proof that the company could cover every sponsored worker's wage in the same period.
This deserves attention from employers in industries where volume sponsorship has become common, including trucking, hospitality, construction, and long-term care. If four sponsorship obligations overlap, the employer may need to demonstrate capacity for all four during that period, taking into account wages already paid and when each obligation begins and ends. A company comfortably able to absorb one may not clear the combined figure, and the arithmetic should be run before the commitments are made rather than after.
If you are weighing a multi-worker sponsorship program, the financial modeling belongs at the front of the process. My article on EB-3 PERM processing time in 2026 walks through the timeline this sits inside, and the pieces on EB-3 sponsorship for nursing homes and Schedule A nurse sponsorship cover the industry-specific mechanics.
The leverage point in an ability-to-pay case comes early — before the PERM application establishes the wage the employer is offering for the permanent position, and before the tax return covering the priority-date year is filed. Both decisions can constrain what follows.
By the time a request for evidence arrives asking you to prove capacity for a wage you committed to two years ago, on a return you filed eighteen months ago, the record is largely fixed. What remains is assembling and explaining what already exists.
If you're a business owner weighing EB-3 sponsorship and you're not sure your financials will support it, I'd rather look at them with you now than reconstruct the argument later. My team and I handle EB-3 petitions from the wage determination through the green card, and evaluating whether your company can carry the sponsorship is part of that work, not an afterthought. Contact SG Legal Group to discuss your situation.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Immigration laws and policies are subject to change, and individual circumstances vary. For advice specific to your situation, please consult with a qualified immigration attorney.
Oleg Gherasimov, Esq.
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