- Several leading U.S. tech firms receive millions in tax breaks every year thanks to a little-known program for foreign college graduates.
- The Optional Practical Training (OPT) program allows certain foreign graduates of U.S. universities to work for up to three years, during which time their employers do not have to pay payroll taxes on their wages.
- America’s most profitable tech firms, including Amazon, Intel and Google, are heavy employers of OPT participants.
Many of America’s most prominent and profitable tech firms receive multi-million dollar tax subsidies for hiring foreign graduates of U.S. universities, according to an analysis published Wednesday.
The report from the Center for Immigration Studies, a think tank that advocates lower levels of immigration, identified more than $150 million in tax payments that U.S. companies avoided in 2017 thanks to a little-known program known as Optional Practical Training (OPT).
OPT is a George W. Bush administration addition to the F-1 student visa that allows foreign graduates to work in the U.S. for up to 12 months after graduation — with a 24-month extension if the graduate works in a STEM field.
Under U.S. tax law, employers of OPT participants do not have to pay Social Security and Medicare taxes on the wages earned by those foreign graduates. That payroll tax exemption, which has no direct congressional authorization, does not apply to recent American college graduates.
For 2017, the biggest employers of OPT enrollees were household names in tech and consulting sectors. Number one was Amazon, which employed 7,700 OPT students and recent graduates for an estimated tax subsidy of $27.6 million, according to the CIS report.
A payroll tax exemption on OPT employees was just one of many federal tax breaks Amazon — one of the world’s richest companies by market cap — received in 2017. The company famously paid no income tax on $5.6 billion in profits that year.
Other heavy users of OPT labor include Intel, Google, Microsoft and Facebook, which employed a total of 11,543 participants and received a combined payroll tax subsidy of $40.5 million, according to CIS. Overall, the 22 largest employers of OPT participants saved $155.8 in payroll taxes they would have had to pay if they had hired Americans for those positions instead.
Universities in the U.S. generally support the OPT program because it helps in recruiting foreign students, who pay full tuition costs. Rising participation in OPT has driven the overall foreign student population to a record high of 1.08 million — even as first-time, international-student enrollment declined by about 10,000 in the 2016-2017 school year, according to a November 2017 report from the Institute for International Education. (RELATED: Employer Tax Break Leads To 20% More Foreign College Grads Working In US)
Some labor policy experts argue the OPT subsidy amounts to a hidden incentive for U.S. firms to hire foreign students over recent American college grads. Because U.S. companies are not liable for payroll taxes for OPT employees, they might be less inclined to hire an equally qualified American grad who does not get the subsidy, says David North, the author of the CIS report.
“The employers benefiting from the subsidies directly, and universities benefiting indirectly, know all about the program, which is all but unknown to the older Americans subsidizing it, and is similarly unknown to the young U.S. college grads who are hurt by it,” he wrote in February.
“Given this twisted political dynamic, inertia, and the total silence of the media on this point, the program persists and grows each year,” North added.
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