In a challenge brought by twenty states challenging President Trump’s $100,000 fee imposed on employers seeking new H-1B visas, Judge Leo T. Sorokin (D. Mass.) ruled in favor of the plaintiffs, vacating the associated policy. From the opinion:

The Court begins with Plaintiffs’ assertion that the Policy intrudes upon Congress’s taxing power. The first inquiry is whether the $100,000 payment requirement constitutes a tax. The parties quibble about whether the requirement resembles a tax or a “penalty” as characterized by two Supreme Court precedents: Bailey v. Drexel Furniture Companyand National Federation of Independent Business v. Sebelius. 

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Here, the $100,000 payment requirement for all H-1B petitions does not aim to establish that hiring H-1B workers is illegal. The payment is not a penalty, just as the IRS fee in Sebelius was not, because it is not “punishment for an unlawful act or omission.” Hiring workers pursuant to the H-1B program is plainly lawful. . . . Nor is this case analogous to Drexel. There, the exaction was clearly imposed to outlaw the hiring of child laborers and to punish employers who deviated from this standard. The Supreme Court’s reasoning in this pair of precedents supports a finding that the $100,000 payment requirement amounts to a tax, not a penalty.

Defendants’ arguments to the contrary are unpersuasive. They note that the $100,000 fee is collected by DHS and not the IRS, which they argue resembles Drexel, where the penalty was collected by the Secretary of Labor. But neither Sebelius nor Drexel stands for the proposition that the particular agency charged with collecting the fee determines whether the fee constitutes a tax. Indeed, the Supreme Court recently found that tariffs assessed by DHS amount to taxes for the purposes of the Constitution’s Taxing Clause. Next, Defendants contend that that the payment requirement cannot constitute a tax because the purpose of a tax is to raise revenue, and the Policy has had the result of decreasing the number of H-1B petitions as well as the total fees collected by USCIS from H-1B applications. This argument falls short. An obvious purpose of the Policy is to raise revenue—it charges a substantial fee for all H-1B petitions. That total revenue from H- 1B petitions has declined does not mean raising revenue was not a purpose of the Policy; rather, it means that such a purpose was not achieved. Purpose and effect are different. Moreover, every $100,000 payment made pursuant to the Policy does raise revenue. That is indisputable. No legal authority suggests that a payment requirement qualifies as a tax only if it increases the total revenue generated from that particular tax. Finally, as Plaintiffs point out, the government may impose a tax with the purpose of curbing the purchase of undesirable goods (e.g., a tobacco tax). Such a tax does not lose its identity as a tax because its ultimate aim or effect is to reduce revenue. 

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That does not end the Court’s analysis. While the Constitution exclusively vests Congress with the “Power To lay and collect Taxes, Duties, Imposts, and Excises,” Congress can delegate the taxing power to the executive branch so long as it “clearly” indicates “its intention to delegate.” . . .

Plaintiffs argue that these provisions do not confer the power to impose taxes, relying on the Supreme Court’s recent guidance in Learning Resources. . . . Applying Learning Resources to the case at hand, the Court finds that INA §§ 212(f) and 215(a) do not delegate taxing power to the President. These sections allow the President to impose “restrictions,” “rules,” “regulations,” “orders,” “limitations,” and “exceptions” to the entry of noncitizens to the United States. Like the powers delineated in the IEEPA, none of these terms, by their ordinary meaning, include the power to tax.