In another important decision,  the BIA clarified  in  Matter of Ilic, 25 I.& N. Dec.
717 (BIA 2012) that only the principal beneficiary needs to satisfy the grandfathering
rules including physical presence for the purpose of adjustment of status under INA §
245 (i).  See INA § 245 (i)(1)(C).

Svetislav Ilic  who was the derivative beneficiary in this case) was put in removal
proceeding and then granted adjustment of status by IJ under § 245 (i), 8 U.S.C. §
1255(i) based on an approved I-130 petition for his wife.  He qualified for this
section based on being the principal beneficiary of the petition filed by  sister in
1999. Ilic was also the beneficiary of an approved I-140 petition with a priority date
in 2004.  He admitted that he was not present in the United States as of December 21,
2000. DHS argued that the rules of physical presence should apply to Ilic as well,
because he had become "principal grandfathered alien" since he was the "principal"
adjustment of status applicant.

The BIA explained that there are two categories of grandfathered aliens - principals
and derivatives. Therefore, different rules on physical presence apply. If Ilic, not
his wife, was a principal beneficiary, the regulations would require him to be
physically present in the US as of December 21, 2000. Although the BIA referred to 8
C.F.R. § 1245.10(a)(1)(ii) and 22 C.F.R. § 40.1 (q) and decided that Ilic was a
derivative. 8 C.F.R. § 1245.10(a)(1)(ii) states that the physical presence"requirement
does not apply with respect to a spouse or child accompanying or following to join a
principal alien who is a grandfathered alien." Consequently, the only applicant whose
physical presence as of December 21, 2000 matters, was his wife's. Based on that factual
finding the BIA remanded the matter.