In 2004, Congress raised the H-1B annual limit by exempting 20,000 students a year who earned a master’s degree or higher from a U.S. university. The immigration bill was the last time lawmakers increased access to high-skilled foreign nationals. Without the law, up to 400,000 highly skilled individuals with a master’s degree or higher would never have been allowed to work in the United States.
The 1990 Immigration Act Set A Low Annual Limit On H-1B Visas
When Congress passed The Immigration Act of 1990, it established two numerical restrictions that proved frustrating to employers and high-skilled foreign nationals: a 65,000 annual limit on new H-1B petitions and a 140,000 yearly ceiling on employment-based green cards. Every year for the past two decades, employers have exhausted the supply of H-1B visas, and over one million Indians now wait in the first, second and third employment-based green card categories, according to a National Foundation for American Policy analysis.
Before 1990, going back decades, employers could use H-1 visas, including for high-skilled professionals, without a numerical limit. Warren Leiden, executive director of the American Immigration Lawyers Association when the 1990 Act became law, said the H-1B provisions in 1990 were “protectionist.” In addition to imposing new requirements on employers, the law, as noted, set a low annual limit that failed to anticipate the impact of technology.
The internet, and later smartphones, AI and other developments, boosted the demand for highly skilled labor far beyond 65,000 new foreign nationals a year. More than 70% of the full-time graduate students in electrical engineering and computer and information sciences at U.S. universities are international students. Leiden recalls that the 65,000 number was not based on a thoughtful analysis of future economic needs but instead was “pulled out of the air.”
The Immigration Bills In 1998 And 2000 Temporarily Increased H-1B Visas
In 1998, Congress passed the American Competitiveness and Workforce Improvement Act, which increased the H-1B annual limit to 115,000 in FY 1999 and 2000 and 107,500 in FY 2001. Senator Spencer Abraham (R-MI), who I worked for at the time, authored the legislation. He believed greater access to high-skilled foreign nationals would help drive innovation and keep the United States competitive in a technology-based economy. His House counterpart, Rep. Lamar Smith (R-TX), wanted to impose new restrictions on high-skilled immigration. The two men reached a compromise. The Clinton administration negotiated further changes with Senator Abraham until a final product was reached and passed by Congress.
The need for the 1998 legislation became apparent when companies reached the 65,000 annual limit for the first time in FY 1997. However, the increase Congress passed in 1998 proved inadequate: Companies exhausted the H-1B supply of 115,000 in FY 1999 and FY 2000.
In 2000, Congress passed the American Competitiveness in the 21st Century Act, which increased the H-1B annual limit to 195,000 for FY 2001, FY 2002 and FY 2003. Senator Abraham, Rep. Smith and the Clinton administration once more came to a compromise on Abraham’s initial legislation.
In FY 2001, 163,600 of the 195,000 H-1B petitions were utilized. However, due to an economic downturn, employers used only 79,100 H-1B petitions in FY 2002 and 78,000 in FY 2003, despite the 195,000 annual limit in those years. Companies argued it showed they hired H-1B visa holders based on the demand for labor, not because, as some critics charged, individuals with H-1B status worked for less money. The H-1B annual limit returned to 65,000 in FY 2004.
The 2004 Immigration Legislation That Increased H-1B Visas
After employers exceeded the H-1B annual limit in FY 2004, companies lobbied for an H-1B increase. After an economic downturn and the terrorist attacks of September 2001, the mood on immigration turned less favorable in the United States. Still, the need for tech talent remained.
“We would have loved for the H-1B cap to return to 195,000 a year,” said Lynn Shotwell, who served as executive director of the American Council on International Personnel.
Senator Abraham, who chaired the Senate immigration subcommittee, lost his race for reelection in November 2000, so discussions began with Rep. Lamar Smith, chair of the House immigration subcommittee, and his staff about increasing the H-1B cap. Shotwell recalls that Smith’s chief of staff expressed interest in helping to find a legislative solution.
“We hoped emphasizing the need for highly qualified workers and the 20,000 exemption for graduate students would be a stepping stone for green card reform,” said Sandy Boyd, who chaired the Compete America coalition and was vice president of human resources policy at the National Association of Manufacturers. Former Intel CEO Craig Barrett had argued for stapling a green card to the diplomas of international students in science and engineering fields.
Tech companies launched a public education campaign with a “passport to prosperity” featuring outstanding immigrants. Companies explained that when recruiting for permanent positions on U.S. campuses, most of the people they encountered in advanced degree programs were international students. Technology companies had started expanding again after the dot-com bust, and members of Congress worried about American competitiveness.
Those in the business community who participated in the effort recall a pivotal moment came at a Semiconductor Industry Association breakfast meeting with several Republican members of Congress, primarily Judiciary Committee members with jurisdiction over immigration. After company executives provided data on engineering graduate-level graduation rates on campuses in those members’ districts and told stories about the need for talent, the members of Congress expressed shock and were receptive to changing the law.
Participants recall that Rep. Smith did not appear to expect significant support from other Republicans to raise the H-1B cap. However, the opposite was the case, as one Republican member present even suggested giving green cards to every graduating engineer. The meeting indicated that Rep. Smith acted as a brake against more favorable measures that could have passed on high-skilled immigration. That became clear as the legislation developed.
Rep. Smith was interested in reestablishing the enforcement provisions from the 1998 and 2000 bills. In 1998 and 2000, when Sen. Abraham negotiated a new fee for scholarships and job training with Sen. Ted Kennedy (D-MA) and additional enforcement measures with Rep. Smith and the Clinton administration, he insisted these provisions be temporary since the increase in H-1B visas was temporary. That turned out to be crucial because it provided leverage for an increase in H-1B visas. It meant that when the annual H-1B cap returned to 65,000 in FY 2004, the scholarship and training fee on H-1B petitions and the new attestations on recruitment and nondisplacement disappeared. That set up a legislative compromise.
The most significant measures in the bill that emerged and became law included:
– An exemption of 20,000 from the H-1B annual limit for foreign nationals who “earned a master’s or higher degree” from a U.S. university.
– Making permanent recruitment and nondisplacement attestations from the 1998 and 2000 laws.
– Creating permanent authority for the Secretary of Labor to investigate abuses of H-1B visas without a complaint filed after meeting certain requirements.
– Making permanent provisions from the 1998 and 2000 laws to require employers to pay a fee towards scholarships and job training. The law raised most employers’ fees from $1,000 to $1,500.
– Creating a $500 fee on H-1B and L-1 visas for “fraud prevention and detection.”
– Changing the L-1 visa category to ensure that intracompany transferees worked one year abroad (rather than six months) before working in the United States. The bill restricted using L-1 visas to “provide labor for hire.”
The 2000 law had exempted from the 65,000 annual limit H-1B petitions for U.S. universities and nonprofit and government research institutions.
Congress passed the “L-1 Visa and H-1B Visa Reform Act” on November 20, 2004. President George W. Bush signed it into law as part of omnibus legislation on December 8, 2004.
Randel Johnson, who worked on immigration policy at the U.S. Chamber of Commerce during this period, said it’s unfortunate the business community could not expect to see in today’s environment the type of immigration liberalization embodied in the 1998 and 2000 laws that increased H-1B visas. He considers the relative narrowness of the H-1B increase in 2004 showed how difficult increasing immigration had become even four years after the 2000 legislation.
“Back then, we had a bipartisan consensus that business immigration was good for the country, and we worked with Rep. Lamar Smith and Rep. Zoe Lofgren (D-CA),” said Lynn Shotwell.
Rep. Lofgren played a critical role in ensuring Democratic support and helping to smooth the way for including the bill in the omnibus package, according to Sandy Boyd.
The Immigration Legacy Of The H-1B Increase In The 2004 Bill
The legacy of the 2004 bill remains mixed. By becoming law, the bill has allowed up to 400,000 graduates of U.S. universities to gain H-1B status and remain to work in the United States. Many of these individuals have likely become U.S. citizens and contributed to the American economy as professionals, researchers and entrepreneurs.
Over the past two decades, employers have paid more than $6 billion in H-1B fees that have funded approximately 100,000 scholarships for U.S. students in science and technology fields and job training for U.S. workers, according to an NFAP analysis.
Despite the 20,000 exemption for advanced degree holders, the H-1B annual limit has remained inadequate. The 85,000 annual limit (65,000 plus the 20,000 exemption) equals only 0.05% of the U.S. labor force. According to USCIS, the agency received H-1B registrations for 442,000 unique beneficiaries for FY 2025, five times more than the 85,000 ceiling. That means USCIS, in effect, was forced to block 300,000 to 350,000 high-skilled foreign nationals from working in the United States in 2024 due to the annual limit under U.S. law.
Research by economist Britta Glennon concluded restrictions on H-1B visas result in more jobs leaving the United States. Economist Giovanni Peri and colleagues found that the H-1B annual limit has prevented employers from creating hundreds of thousands of jobs for U.S. workers, including by discouraging investment.
Since 2004, immigration reform bills have included liberalizing reforms for business immigration on H-1B visas and employment-based green cards. Those bills failed to become law. In some cases, it was due to disagreement over addressing the fate of individuals living in the country in unlawful status in comprehensive legislation.
During the Trump administration, new restrictions resulted in skyrocketing H-1B denial rates and many costly Requests for Evidence for companies until a legal settlement compelled Trump officials to end actions that judges found unlawful. A second Trump administration could enact those or other policies to restrict employer access to high-skilled foreign nationals.
While some have blamed “Congress” for the lack of additional immigration legislation, it is individual members who often prevent a bill from becoming law. In 2022, in what became the CHIPS and Science Act, the Democratic majority in the House passed a startup visa and an exemption from annual green card limits for foreign nationals with a Ph.D. in science and technology fields and those with a master’s degree “in a critical industry.” However, Sen. Charles Grassley (R-IA), then the ranking Republican on the Judiciary Committee, blocked the provisions from becoming law in a conference committee. In January 2025, Grassley is expected to resume his position as chair of the Senate Judiciary Committee.