Alert: Federal Court Declares $100,000 H-1B Fee An Unlawful Tax, and Vacates the DHS Policy

On June 8, 2026, in State of California et al. v. Markwayne Mullin et al., the U.S. District Court for Massachusetts issued a decision, vacating the Department of Homeland Security (DHS) policy implementing Presidential Proclamation 10973. The September 2025 proclamation imposed, according to the court, an unlawful $100,000 supplemental tax on certain new H-1B petitions. The court ruled in favor of the 20 state attorneys general, finding the Proclamation and the policy implementing it to be unconstitutional and contrary to law.

While this ruling is a significant development for employers who rely on the H-1B program, the practical impact of the decision remains uncertain. An appeal by the government is very likely and could result in a pause of the district court’s decision. Such an outcome would effectively reinstate the $100,000 fee on certain H-1B petitions pending final judicial action. Until litigation reaches a conclusion, including potential review by the Supreme Court, employers should proceed with caution.

This alert supplements our prior coverage of Proclamation 10973. For background, please see our earlier alerts:

• Alert: Presidential Proclamation on New $100,000 H-1B Fee
• Litigation Filed Against $100,000 H-1B Entry Fee Proclamation
• USCIS Clarifies $100,000 H-1B Fee Proclamation

What the Court Decided About the $100,000 H-1B Fee

The court vacated DHS’s $100,000 H-1B fee on every substantive claim, based on four independent findings:

1. The $100,000 Payment Is an Unauthorized Tax. The court found that the $100,000 fee constitutes a tax. Congress did not delegate authority to the President to impose such a tax in this circumstance.
2. The Policy Violated the APA’s Notice-and-Comment Requirements. The court found that the agency materials (e.g., CBP memoranda, State Department FAQs, and USCIS website updates), rather than the Presidential Proclamation itself, actually created the $100,000 payment obligation and were therefore “legislative rules” under the Administrative Procedure Act (APA). Legislative rules under the APA require public notice-and-comment rulemaking before taking effect. The government bypassed this process and, therefore, violated the APA.
3. The Policy Was Arbitrary and Capricious in Violation of the APA. The court found that the agency materials implementing the Proclamation were arbitrary and capricious, as the government did not demonstrate sufficient methodologies for developing the $100,000 fee policy.
4. The Policy Exceeded Statutory Authority. The court held that no statute authorizes executive agencies to impose a $100,000 tax on H-1B petitions. The existing fee-setting authority under the Immigration and Nationality Act (INA) plainly does not encompass a $100,000 supplemental payment. The INA, by contrast, allows DHS to set adjudication fees with explicit limitations.

What the Vacatur Means and What It Does Not

The court’s remedy is known as “vacatur.” Vacatur is a legal ruling that the agency policy is void and without legal effect. In practical terms, the $100,000 payment requirement has been struck down nationwide, and it bars the government from collecting the fee, whether the petitioner was involved in the lawsuit or not. If this ruling stands unchallenged, employers filing otherwise-impacted H-1B petitions would no longer be required to make the $100,000 payment.

However, employers should not assume that the $100,000 fee is gone for good. Several important caveats apply:

• Further Litigation Is Expected. Although the government has not yet filed a notice of appeal, an appeal is virtually certain. Moreover, the government may seek a stay of the vacatur pending appeal. This would mean that the decision to vacate the $100,000 fee would be on hold until the appeal is settled, effectively reinstating the policy (and requiring employers to pay the fee or not file certain H-1B petitions).
• A Conflicting District Court Ruling Exists. The U.S. District Court for D.C. reached the opposite conclusion of this ruling in Chamber of Commerce of the U.S. v. U.S. Department of Homeland Security. While that decision is not binding on other courts, it underscores that this legal question is not resolved and that the ultimate outcome remains uncertain until an appellate court, or the Supreme Court, provides a definitive answer.
• Agency Guidance Is Outstanding. USCIS and the State Department have not yet issued guidance addressing the effect of the ruling on pending and future H-1B filings. Until they do, employers should be cautious about any decision to rely on this ruling.

What This Means for Employers

While the ruling—15 business days before the end of the annual H-1B lottery—appears favorable for employers, the practical path forward requires careful planning. Given that this ruling comes nearly nine months after the implementation of the $100,000 fee (and in the middle of the FY2027 H-1B cap cycle), there are several considerations for employers planning next steps.

1. Employers should not assume that petitions filed without the $100,000 payment will automatically be accepted. USCIS has not yet updated its processing guidance, and until it does, the operational landscape remains unclear.
2. Employers with pending H-1B petitions that have received requests for the $100,000 fee may be considering responding to the requests immediately to benefit from the current ruling. However, this comes with significant risks if an additional stay pauses the ruling.
3. Employers only have three weeks to file H-1B petitions for those selected in the annual registration and lottery process. Whether to adjust a petition strategy from requesting a “change of status” (which has not been subject to the $100,000 fee) to requesting “consular notification” (which has been subject to the $100,000 before the court’s decision) involves a risk assessment in light of the uncertainty of how future litigation will unfold. We recommend that all H-1B petitioning employers speak to their immigration counsel immediately about which cases, if any, warrant an adjustment of strategy, communicate those situations to their population, as well as a number of other employee-specific and organization-wide considerations.
4. H-1B beneficiaries should consider refraining from international travel given the ongoing uncertainty. If the additional stay is granted, travel would trigger a petition being subject to the policy and thus require their employer to pay the $100,000 fee.
5. Whether employers who previously paid the $100,000 fee are entitled to a refund is an open question. The Court’s order vacates the implementing policy but does not address the mechanics of refunds. In other contexts, such as the tariff cases following the Supreme Court’s Learning Resources decision, the Administration has refused to issue refunds until ordered to do so. Employers who have paid the fee and are interested in pursuing refunds should contact their immigration counsel for specific advice.

The ruling raises immediate questions for employers managing H-1B workforces. While the decision is an impactful one for the H-1B program, it continues to be seen whether this decision will stand and whether DHS and the State Department will implement new guidance in the near term.

Please contact your Klasko attorney to discuss how this ruling affects your organization’s immigration program and to develop a tailored response strategy.

The material contained in this post 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.

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