The H-1B modernization rule clarified that a nonprofit entity may engage in multiple fundamental activities outside the formal affiliation agreement.

The H-1B visa program remains one of the most sought-after pathways for skilled foreign workers to enter the United States. However, the annual numerical limitation, commonly known as the "H-1B cap," creates significant challenges for both employers and prospective employees. Recent modernization efforts by U.S. Citizenship and Immigration Services (USCIS) have introduced important changes that affect how cap exemptions work and which nonprofit organizations may qualify for cap-exempt status. Let's explore what these changes mean for nonprofit organizations.

Understanding the H-1B Cap

H-1B visas are for temporary (nonimmigrant) workers engaged in a specialty occupation that requires the attainment of at least a bachelor's degree, or equivalent, for entry into the occupation. Because of the high number of interested applicants each year, the government conducts a lottery to select candidates. Once selected, the employer may then file an H-1B petition on behalf of the candidate.

The H-1B cap consists of two main components:

• Regular cap: 65,000 visas annually for all H-1B beneficiaries
• Master’s cap: An additional 20,000 visas for beneficiaries holding U.S. master's degrees or higher

The fiscal year runs from October 1 to September 30, with USCIS typically opening the filing period in early April. Due to overwhelming demand, the cap is often reached within days, triggering a lottery system to select which petitions will be processed. For fiscal year 2026, only one third of interested beneficiaries were selected. However, certain employers are exempt from the H-1B cap lottery, which allows them to bypass the H-1B lottery and to file H-1B petitions at any time during the year.

Nonprofit Organizations That May Qualify for Cap Exemption

• Institutions of higher education (nonprofit colleges and universities)
• Nonprofit organizations related to or affiliated with an institution of higher education
• Nonprofit research organizations or government research organizations

The H-1B Modernization Rule: Key Changes

Nonprofit organizations that don’t qualify as research organizations can qualify for cap exemption by (1) entering into a formal written affiliation agreement establishing an active working relationship with an institution of higher education for the purposes of research or education, and (2) demonstrating that a fundamental activity of the nonprofit entity is to directly contribute to the research or education mission of the institution of higher education (this used to read “primarily engaged” in research or education activities). The H-1B modernization rule clarified that a nonprofit entity may engage in multiple fundamental activities outside the formal affiliation agreement.

The H-1B modernization rule also established that H-1B beneficiaries who are not directly employed by cap-exempt institutions can still obtain cap exemptions if they meet specific criteria. To qualify for the exemption, the H-1B beneficiary must spend at least half of their work time performing job duties at a cap-exempt entity, which includes higher education institutions, nonprofit research organizations and government research entities.

The regulation also provides significant flexibility regarding work location, clarifying that work performed "at" the qualifying institution encompasses various arrangements including traditional on-site work, telework, remote work and other off-site work performed within the United States.

Strategic Advantages for Your Organization

Immediate Hiring Capability

Unlike cap-subject employers who must wait for the annual lottery period (typically April), you can file H-1B petitions year-round. This means when you identify the right candidate, you can move quickly without waiting up to one year for the next filing window.

No Numerical Limitations

You're not constrained by the 85,000 annual cap that affects most employers. This removes a significant barrier to hiring international talent and eliminates the uncertainty of lottery selection.

Faster Processing Options

Cap-exempt petitions are eligible for premium processing, allowing for 15-day adjudication when time is critical.

Enhanced Recruitment Positioning

When competing for top international talent, your cap-exempt status is a significant advantage. Candidates often prefer opportunities with cap-exempt employers due to the reduced uncertainty and faster processing.

Key Takeaways and Next Steps

While the expanded definition of “affiliation” creates new opportunities for organizations to qualify for cap exemption, the enhanced documentation requirements demand more thorough preparation and strategic planning.

For employers and foreign workers navigating the H-1B process, understanding these changes is crucial for developing effective immigration strategies. The key lies in carefully evaluating whether your situation meets the modernized standards and preparing comprehensive documentation to support your cap exemption claim.

About Duane Morris

Attorneys in our Immigration Law Group have extensive experience representing nonprofit organizations in cap-exempt H-1B filing. On September 10, 2025, we will present a webinar, Navigating the H-1B Lottery: Understanding Exemptions for Employers Under the New H-1B Modernization Rule.

For More Information

If you have any questions about this Alert, please contact Lauren Aucoin, Guilherme Massetti, any of the attorneys in our Immigration Law Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.