H-1B Reform: DHS Targets Cap Exemptions and Third-Party Rules

What Happened

The [Spring 2026 Unified Regulatory Agenda](https://www.reginfo.gov/public/do/eAgendaMain), released on July 3, 2026, sets out each federal agency's rulemaking priorities for the months ahead. The DHS section contains two H-1B-specific items that together represent the most significant proposed changes to the H-1B program since the [modernization final rule](https://www.federalregister.gov/documents/2024/12/18/2024-29406/modernizing-h-1b-requirements-and-oversight-and-providing-flexibility-in-the-f-1-program) that took effect on January 17, 2025.

The first is a proposed rule (RIN [1615-AD00](https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202510&RIN=1615-AD00)) targeting the H-1B cap-exemption framework, third-party placement of H-1B employees, and employer accountability for program violations. DHS has set a target publication date of August 2026 for the Notice of Proposed Rulemaking (NPRM). The second is a final rule expected this month that would expand the 9-11 Response and Biometric Entry-Exit Fee — the so-called "50-50 fee" — to H-1B and L-1 extension-of-stay petitions for the first time.

The regulatory agenda is a statement of intent, not enacted law. However, immigration law firm [Fragomen](https://www.fragomen.com/insights/united-states-immigration-agencies-unveil-regulatory-agendas-for-the-coming-months.html) has characterized these items as near-term priorities, and the 50-50 fee expansion carries the weight of a final rule that has already cleared the policy pipeline twice.

H-1B Cap Exemption and Third-Party Placement Reform

The proposed rule under RIN 1615-AD00 would target three pillars of the H-1B program:

• Cap-exemption eligibility: Currently, employers affiliated with institutions of higher education, nonprofit research organizations, and government research organizations can hire H-1B workers at any time, exempt from the annual 85,000 cap and the registration lottery. The proposed rule would revise the eligibility criteria for these exemptions, potentially narrowing the categories of employers that qualify.
• Third-party placement requirements: Employers that place H-1B workers at third-party client sites — a staffing model widely used by IT consulting and outsourcing firms — would face additional documentation requirements. According to reporting by the [Times of India](https://timesofindia.indiatimes.com/world/us/trump-administration-eyes-tighter-h-1b-green-card-and-student-visa-rules-indians-could-be-among-most-affected/articleshow/132236640.cms) and [BusinessToday](https://www.businesstoday.in/nri/visa/story/stricter-h-1b-rules-from-august-opt-changes-in-2027-what-trumps-new-visa-plans-mean-for-indians-542136-2026-07-10), the proposed rule may require employers to demonstrate a genuine employer-employee relationship, provide evidence that the worker will perform specialty-occupation duties at the client location, and maintain more detailed documentation of each assignment.
• Enhanced scrutiny for violators: Employers found to have violated H-1B program requirements could face heightened review of all future petitions, creating a compliance history that follows the employer across filings.

The 50-50 Fee Expansion

Separately, a final rule expected in July 2026 would expand the application of the 9-11 Response and Biometric Entry-Exit Fee to H-1B and L-1 extension-of-stay petitions. This fee currently applies only when a covered employer files a petition for an initial grant of status or a change of employer.

The fee is imposed on employers with more than 50 full-time employees in the United States, more than 50 percent of whom hold H-1B or L-1 nonimmigrant status — hence the "50-50" label. The current fee amounts are $4,000 per H-1B petition and $4,500 per L-1 petition.

Under the final rule, these employers would also owe the fee when filing petitions to extend an existing H-1B or L-1 worker's stay. For large employers with substantial H-1B populations — including major IT outsourcing firms — the cost increase could be significant, as extension petitions are typically filed every three years for each H-1B worker.

According to [Fragomen's analysis](https://www.fragomen.com/insights/united-states-immigration-agencies-unveil-regulatory-agendas-for-the-coming-months.html), this regulation was originally slated for publication in April 2025, then removed from the agenda entirely, but has now been re-added as a short-term priority with a July 2026 target date. The on-again, off-again trajectory suggests the administration sees this as a high-priority revenue and enforcement measure.

Who Is Affected

These two regulatory actions target different but overlapping segments of the H-1B employer universe:

• IT staffing and consulting firms that place H-1B workers at third-party client sites face the most direct impact from both the proposed third-party placement rules and the 50-50 fee expansion.
• Universities and nonprofit research organizations that currently hire H-1B workers exempt from the annual cap may see their exemption criteria narrowed, potentially pushing some petitions into the cap-subject lottery.
• Large employers with workforces exceeding 50% H-1B or L-1 workers will face the fee expansion on extension petitions, adding thousands of dollars per worker per extension cycle.
• H-1B workers employed by affected companies may face indirect effects: longer processing timelines as employers adjust to new documentation burdens, and potential reluctance by some employers to extend H-1B sponsorship if costs increase.

What Attorneys Should Know

The cap-exemption reform under RIN 1615-AD00 is a proposed rule with a target NPRM publication date of August 2026. This proposal was originally slated for September 2025, suggesting it has been under development for over a year. Per the regulatory agenda, no regulatory text has been released yet; [Fragomen notes](https://www.fragomen.com/insights/united-states-immigration-agencies-unveil-regulatory-agendas-for-the-coming-months.html) that the specifics of anticipated proposed and final regulations remain confidential until each is released for publication in the Federal Register.

The 50-50 fee expansion is a final rule, not a proposed rule. This means it can take effect without a public comment period — it has already been through the rulemaking process. Attorneys should monitor the Federal Register daily for publication, as implementation could be immediate or carry a short effective-date window.

For context, the H-1B cap-exempt framework is rooted in [INA § 214(g)(5)](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title8-section1184&num=0&edition=prelim), which exempts from the annual cap petitions filed by or on behalf of institutions of higher education, nonprofit entities related to or affiliated with such institutions, nonprofit research organizations, and governmental research organizations. Any narrowing of these categories would need to stay within the statutory definitions — giving practitioners a potential basis for comments and, if finalized, legal challenge.

The 50-50 fee was established by the [Consolidated Appropriations Act, 2016 (Public Law 114-113)](https://www.congress.gov/bill/114th-congress/house-bill/2029/text). As Fragomen's analysis notes, the fee currently applies only to petitions for an initial grant of H-1B or L-1 status or a change of employer. Whether DHS has the statutory authority to extend the fee to extension petitions by regulation — when the existing framework specifically references initial grants and employer changes — is a question practitioners may want to examine.

What Applicants Should Do

If you currently hold H-1B status or are planning to petition for H-1B classification, here is how these developments may affect your timeline and strategy:

• If your employer is cap-exempt (university, nonprofit research organization): Ask your immigration counsel whether the anticipated changes could affect your employer's cap-exempt status. If there is any risk, consider whether filing a new or amended petition before the rule takes effect might be prudent.
• If you work at a third-party client site: Your employer may need additional documentation to support your petition. Begin compiling evidence of the employer-employee relationship, specialty-occupation duties at the client site, and detailed assignment records now — this documentation will strengthen any petition filed after the rule takes effect.
• If your employer is a 50-50 company: The fee expansion applies to the employer, not the employee, but it increases sponsorship costs. Be aware that some employers may reassess extension sponsorship if costs rise. Having a conversation with your employer about your long-term sponsorship trajectory is prudent.
• For everyone in H-1B status: These proposed rules would not take effect until finalized, which for the NPRM could be a year or more after publication. The 50-50 fee expansion is closer — monitor for the final rule in the Federal Register this month.

How This Fits the Broader H-1B Landscape

These reforms arrive in a regulatory environment that has already undergone significant change. The [wage-weighted H-1B lottery](https://haven-five-hazel.vercel.app/blog/h1b-wage-weighted-lottery-fy2027-results) took effect on February 27, 2026, giving higher-paid positions more entries in the cap-subject selection process. DOL's [proposed prevailing wage increases](https://haven-five-hazel.vercel.app/blog/prevailing-wage-increase-2026-h1b-perm) would raise the floor for H-1B and PERM wages across all four levels. And the [PERM labor market test modernization](https://haven-five-hazel.vercel.app/blog/dol-perm-recruitment-overhaul-2026) would overhaul the recruitment requirements that underpin most employment-based green card sponsorship.

Taken together, the trajectory is clear: higher costs, tighter documentation, and greater scrutiny at every stage of the employment-based immigration pipeline — from the H-1B lottery to the PERM labor certification to the green card adjustment. Employers that depend on H-1B talent should be planning now for a materially different compliance environment by mid-2027.

What Happens Next

For the cap-exemption and third-party reform (RIN 1615-AD00), the next step is publication of the NPRM in August 2026. Once published, the public will typically have 30 to 60 days to submit comments. After the comment period closes, DHS must review feedback and obtain final clearance from the Office of Management and Budget before issuing a final rule — a process that typically takes several months to a year.

For the 50-50 fee expansion, watch the Federal Register for the final rule this month. Because this is a final rule (not a proposed rule), it can take effect relatively quickly after publication.

We will update this post as new developments emerge and link to our analysis of the NPRM text once it is published.