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S 2940119th CongressIn Committee
OPT Fair Tax Act
Introduced: Sep 30, 2025
Sponsor: Sen. Cotton, Tom [R-AR] (R-Arkansas)
Economy & TaxesImmigration
Standard Summary
Comprehensive overview in 1-2 paragraphs
The OPT Fair Tax Act would change how Optional Practical Training (OPT) for F-1 visa holders is treated for payroll taxes. Specifically, it would remove the current exemption that allows OPT-related services to be exempt from certain payroll tax provisions and would instead treat OPT employment as subject to taxes under both the Federal Insurance Contributions Act (FICA) and the Social Security Act. In short, OPT earnings would be treated like other employment for payroll tax purposes, with the usual employee and employer tax obligations applying, beginning in calendar months after enactment. The bill is introduced in the Senate and referred to the Committee on Finance.
Key Points
- 1The bill amends two key tax provisions (IRC 3121(b)(19) and SSA 210(a)(19)) to exclude OPT from the existing exemption, meaning OPT wages become subject to FICA and SSA taxes.
- 2The change applies specifically to F-1 visa holders participating in Optional Practical Training and does not alter other forms of student employment outside OPT.
- 3Effective date: the amendments apply to services performed in calendar months beginning after the date of enactment.
- 4Purpose: to bring OPT employment into the tax framework used for other workers, expanding the tax base and ensuring OPT participants contribute to Social Security and Medicare.
- 5Practical impact: employers would withhold FICA taxes (employee portion and applicable employer matching) on OPT wages, and OPT participants would be responsible for those tax obligations as with other employees.
Impact Areas
Primary group/area affected- F-1 visa holders on Optional Practical Training and their employers (including payroll, human resources, and university sponsorships).Secondary group/area affected- The broader U.S. payroll tax system (Internal Revenue Service and Department of the Treasury) and employers who hire OPT workers.Additional impacts- Potential increase in tax contributions from OPT workers and an added compliance burden for employers (withholding, reporting, and potential payroll adjustments).- Possible effects on the cost/attractiveness of OPT programs for international students and on university employment programs and partnerships.
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