State tells Foxconn it's no longer eligible for tax credits

State tells Foxconn it's no longer eligible for tax credits

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In the latest point of contention surrounding Wisconsin’s $3.6 billion deal with Taiwan-based electronics manufacturer Foxconn, Gov. Tony Evers’ administration has told the company it no longer is eligible for tax subsidies agreed to in the original contract.

The state’s 2017 contract with Foxconn, which included nearly $4 billion in state and local tax incentives, was for a $10 billion, 20-million-square-foot campus and 13,000 jobs over 15 years. However, multiple updates to the company’s plans have resulted in a vastly different project altogether, state officials argue.

In a Nov. 4 letter to Foxconn’s chief business officer, Richard Vinvent, Department of Administration Secretary Joel Brennan said the company’s current project is “materially different in nature, type, cost, size and job-creation terms” than the original Generation 10.5 manufacturing facility to make larger panels for TV screens agreed to in the contract two years ago.

Foxconn has said the project has downsized to a Generation 6 facility, which would manufacture small screens for mobile phones, tablets, notebooks and wearable devices.

“Foxconn is free not to request tax credits and therefore has no obligation to submit new applications,” Brennan wrote in the letter. “However, because Foxconn’s present project has not been applied for, evaluated by WEDC, certified for eligibility, and properly contracted for, it presently is ineligible for tax credits under Wisconsin law.”

In a statement, Foxconn Technology Group confirmed that discussions are taking place with state officials “regarding our commitment to bring substantial impact to Wisconsin’s economy, workforce and educational institutions.”

“Foxconn is in compliance with the terms of the agreement with WEDC and we will continue to work with the State in good faith,” the statement said. “Foxconn is hopeful that we will arrive at a mutually acceptable resolution so we can continue with a project that is important to our company and to the development of technology in Wisconsin.”

Foxconn is required to provide WEDC with an update on its progress and how many jobs have been created by April 1 to determine whether the company qualifies for state tax credits. The company fell 82 jobs short of the minimum required to claim state tax credits in 2018.

The company has said it intends to have its manufacturing facility up and running by the end of 2020.

Foxconn vice chairman Jay Lee earlier this month told the Milwaukee Journal Sentinel the company had hired more than 520 employees and would qualify for state tax credits.

However, Brennan’s letter indicates the company will not be eligible unless the contract is amended to reflect the current project.

Documents first published by The Verge detail back and forth communications between Evers, Brennan, former WEDC Secretary Mark Hogan and current WEDC Secretary Melissa Hughes and Foxconn officials over the project.

According to documents, Louis Woo, an assistant to Foxconn founder Terry Gou, notified state officials that the project had been downsized and expressed an interest in a revised plan to reflect the smaller effort. Hogan agreed that such an amendment was possible.

However, such an amendment from Foxconn never materialized despite several recommendations to company leadership from Hogan, Brennan and Evers over the summer.

Following a tour of the Foxconn site, Hughes on Nov. 18 wrote company officials seeking a sit-down meeting to have further conversations “to discuss how best to align Foxconn’s needs and expectations with those of the State, WEDC, and of course, the citizens of Wisconsin.”

That same day, Alan Yeung, director of U.S. strategic initiatives for Foxconn, wrote Brennan and Hughes expressing frustration that the Generation 6 project would not qualify for tax credits.

“While Foxconn invests millions of dollars into the State of Wisconsin and hires job seekers, these efforts are being impeded by the current administration’s red herrings over the material terms of the Contract, which are overall capital investment and long-term job growth,” Yeung said in the letter.

Assembly Minority Leader Gordon Hintz, D-Oshkosh, who is a member of the WEDC board, described Foxconn as being “dishonest and nontransparent.”

“There’s no viable project, there’s nothing happening that’s remotely close to the contract, and we have a company that seems to be setting itself up for an excuse to potentially back out of the entire project,” Hintz said. “They appear to be disrespecting both our legal system and the transparency that comes along with taking taxpayer dollars.”

Hughes in a statement said she has been pleased with Foxconn’s development so far, but added it’s expected the state’s contract with Foxconn will likely evolve over its 15-year duration.

“As Foxconn implements its strategic vision, WEDC has a process to work with them and evaluate the project to ensure it also meets the needs of Wisconsin’s taxpayers,” Hughes said in the statement. “We are asking Foxconn to come to the table so we can fully understand their plans, how they are evolving, how we can assist them, and how we can do this together in a way that WEDC remains accountable and transparent to the people of Wisconsin who have invested in this project.”


Photos: See the view inside and outside of Wisconsin’s Capitol dome

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