The annual H-1B lottery is an exercise in odds rather than merit. For fiscal year 2026, U.S. Citizenship and Immigration Services (USCIS) received more than 350,000 total registrations for 85,000 available visas, resulting in an approximately 35 percent selection rate. For private employers seeking to retain skilled foreign professionals, the lottery has become a high-stakes gamble with few winners.
Increasingly, however, employers, particularly in technology and life sciences, are pursuing a different strategy: structuring employment through universities, nonprofit research organizations, or hospital systems to secure “cap-exempt” H-1B status. By leveraging a long-standing statutory exemption, these employers can avoid the lottery entirely while remaining compliant.
What began as a narrow academic carve-out has matured into a nuanced compliance model that depends on immigration counsel to keep the distinction between collaboration and regulatory loophole clear. As these affiliations proliferate, practitioners should expect USCIS scrutiny to intensify. Practitioners must ensure that each arrangement withstands both the letter and the spirit of the law.
The statutory basis for cap exemption lies in Section 214(g)(5) of the Immigration and Nationality Act, which exempt from the numerical H-1B cap petition filed by higher-education institutions, nonprofit entities affiliated with such institutions, or nonprofit or government research organizations. The regulation further defines “related or affiliated nonprofit entity” to include organizations that share ownership or control with a qualifying institution, are operated by or in association with such an institution, or have a written affiliation agreement showing a shared educational or research mission.
This flexibility has paved the way for what practitioners call the “cap-exempt partnership” model – an arrangement in which a private employer collaborates with a qualifying university or nonprofit to employ or host an H-1B worker whose work directly advances the cap-exempt institution’s mission.
The benefits for employers are obvious: cap-exempt petitions can be filed year-round, are not subject to numerical limits, and may run concurrently with cap-subject employment. For startups and R&D-driven firms, that flexibility can mean the difference between retention and loss of key talent.
But that same flexibility creates compliance risks. USCIS examiners may question whether the qualifying relationship is genuine. Institutions using this model are recommended to follow several best practices to mitigate non-compliance consequences.
First, a genuine written affiliation agreement is essential and should specify mutual oversight, shared research goals, and resource exchange—such as joint supervision or shared facilities. Generic “partnership” language would be inadequate. Second, employersshould show evidence that the H-1B employee’s duties directly advance the nonprofit’s mission, like letters from department chairs, grant documentation, or collaborative publications. Third, location details should be aligned as well. When duties occur on university premises, the Labor Condition Application (LCA) must list the nonprofit’s address and corresponding wage level. If work is split, all worksites should be listed and ensure that exempt duties remain primary. Finally, because affiliations evolve, employers should evaluate if a refresh of documentation is required at the time of H-1B extension to confirm that the relationship remains active. An expired memorandum of understanding or funding lapse may constitute a material change, requiring an amended petition.As part of this,educating all stakeholders, including university counsel and HR offices, is critical. Often immigration implications of such arrangements can be misunderstood. Immigration counsel should provide standardized language mirroring the regulatory definition and ensure internal consistency.
Critics argue that cap-exempt partnerships allow private entities to “piggy-back” on nonprofit status, effectively sidestepping Congress’s intent to limit H-1B numbers. Some employers have attempted to claim exemption based solely on fee-for-service contracts, undermining program integrity.
While the broader federal policy environment is in a period of uncertainty, USCIS continues to recognize legitimate affiliations between universities and qualifying employer partners. We also note in 2022, the White House encouraged academia-industry collaboration to strengthen U.S. competitiveness and retain foreign-born STEM talent in coordination with DHS and the State Department. These initiatives facilitated joint research appointments, cap-exempt H-1B employment, and smoother transitions from academic to private-sector roles.
Yet, as immigration oversight tightens and the political climate shifts, a rollback of these STEM-friendly policies is plausible. The current administration could revisit or rescind parts of the 2022 guidance, particularly those encouraging flexible interpretations of what it means to “directly further” an institution’s mission. If that occurs, H-1B cap-exempt adjudications may see a narrower interpretation of affiliation, requiring stricter proof of institutional control, supervision, and on-site presence.
Such a shift would have tangible effects. Cap-exempt partnerships built on shared research, remote collaboration, or partially private funding could face higher evidentiary burdens and slower processing times. Employers would need to bolster documentation—detailing supervision structures, funding mechanisms, and specific research outputs that advance the nonprofit’s educational or research purpose.
In this evolving environment, the most prudent strategy is to prepare every affiliation as if it will be challenged. At the same time, maintaining active engagement with universities, research consortia, and professional associations can help shape the next iteration of STEM-policy guidance, emphasizing the national interest in lawful, transparent collaboration.
Ultimately, the sustainability of the cap-exempt model depends on policy stability. Should the government retreat from its current STEM-innovation stance, the line between collaboration and circumvention may narrow — raising the stakes for every H-1B petition premised on university affiliation.
For immigration practitioners, the takeaway is clear: treat affiliation as a substantive relationship, not a technical label. A well-structured partnership should withstand both legal and ethical scrutiny, supported by contemporaneous records, verifiable supervision, and tangible shared outcomes.
Handled responsibly, these arrangements can expand the U.S. innovation ecosystem, strengthen academic–industry collaboration, and provide a lawful alternative to the restrictive H-1B lottery. But if treated as a paper exercise, they invite RFEs, revocations, and reputational harm. The cap-exempt model rewards diligence and transparency over expedience—and in that sense, it represents the future of immigration compliance itself.
The material contained in this article does not constitute direct legal advice and is for informational purposes only. An attorney-client relationship is not presumed or intended by receipt or review of this presentation. The information provided should never replace informed counsel when specific immigration-related guidance is needed.
Reprinted with permission from the November 13, 2025 edition of The Legal Intelligencer© 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 – reprints@alm.com.
