State officials to begin review of Foxconn jobs report

Audited documents will determine whether company receives tax credits agreed to in 2017 contract

Foxconn's groundbreaking ceremony in Wisconsin in June 2018, brought out then-U.S. House Speaker Paul Ryan, President Donald Trump, then-Gov. Scott Walker, Foxconn Founder and CEO Terry Gou and Christopher Murdock. The company can receive cash payments from the state because it has other refundable tax credits. It has no taxes to reduce because a manufacturing tax credit virtually eliminated them. (Photo courtesy of White House/Creative Commons)

Foxconn — and Wisconsin — are another step closer to learning whether the Taiwan-based company will qualify for a portion of the $3 billion in state tax credits that were part of the deal signed three years ago to bring the electronics manufacturer to Racine County.

A formal audit of the company’s 2019 jobs report was released Wednesday, a week after being submitted to the Wisconsin Economic Development Corp. But the audit doesn’t evaluate whether the company has met conditions set in the contract that former Gov. Scott Walker and the state signed with Foxconn in 2017.

That will be decided in the coming months as state officials review the audited report and compare it against the terms of that contract. The review might not be finished until the fall.

In a statement to the Wisconsin Examiner Thursday, Sam Rikkers, deputy secretary and chief operating officer for the Wisconsin Economic Development Corp. (WEDC) said the agency’s verification process “will likely take several months.”

“WEDC and Foxconn continue to discuss aligning the contract with the project as it is now taking shape,” Rikkers stated. “We are in regular and active conversations with Foxconn to align the contract with the project. It is WEDC’s objective to do so in order to support the project.”

Repeated shifts in what Foxconn is doing and plans to do at its Mount Pleasant complex have cast doubt on whether the state job creation tax credits will be granted this year.

Assembly Democratic Minority Leader Gordon Hintz

“The likelihood of them being eligible for anything — or hitting benchmarks or even knowing anything about what’s happening — don’t seem to be clear,” says State Rep. Gordon Hintz (D-Oshkosh), Assembly minority leader and a longtime skeptic of the project.

From his vantage point, Hintz says, “they are currently ineligible for any credits, even if they met thresholds [for job creation] because they’re out of compliance with the current contract.”

That 2017 contract called for the company to build a 22-million-square-foot plant employing 13,000 people to build Gen 10.5 liquid-crystal display (LCD) screens used in telecommunications products such as televisions, tablets and smartphones.

In 2018, the company was denied a jobs tax credit worth up to $9.5 million for its first year when it reported hiring 178 full-time workers, short of the target of 260 positions.

Foxconn later downgraded its plan for the Mount Pleasant factory to Gen 6 screens. That was a departure from the contract, state officials told the company in late 2019 in communications that were obtained by the technology news website The Verge.

Department of Administration Secretary Joel Brennan told the company in November 2019 that it had been “opaque about its project plans throughout 2018” and had not committed to an alternative project to the Gen 10.5 screens.

At the end of 2019, the WEDC again denied the company tax credits for its 2018 jobs report, this time declaring it would not award them without an amended contract.

In addition to the $3 billion in state tax credits that are still on hold for the company, the village of Mount Pleasant and Racine County have already invested $911 million to help pay for the development of the factory site.

THE MORNING NEWSLETTER
Subscribe now.

Meanwhile, Foxconn has several times announced changes in its plans for the Racine County factory. After the COVID-19 pandemic took hold earlier this year, the company announced plans to produce ventilators there in a partnership with the medical technology company Medtronic, through Foxconn Industrial Internet (Fii), a Foxconn business group.

Both because Fii was not included in the Wisconsin-Foxconn contract, and because ventilators had not been identified as a product in that contract, that project appears also not to qualify for tax credits.

Another Verge article in April 2020 asserted that Foxconn’s promised innovation centers around the state have been empty for more than a year.

The 2019 jobs report submitted April 1, for which the audited version has now been released and will go on to be flyspecked by the WEDC over the next several months, showed that 60% of the employees it hired last year joined the company in November and December. The cover letter for the company declared that as of the end of the year, Foxconn employed more than 600 people, and that more than 550 of them would meet qualifications for the tax credits in the state contract.

The audit report released Wednesday consists of verification of details in that report and their internal consistency with other business records. The letter from the audit team at the accounting firm Deloitte & Touche specifies that its findings do not address whether the information Foxconn has reported make it eligible or not for the state tax credits. “That determination rests with the parties to the Agreement, not the undersigned,” the letter states.

This story was updated at 8:53 a.m. Thursday, 7/23/2020, with comments from WEDC.

Erik Gunn
Senior Reporter Erik Gunn reports and writes on work and the economy, along with related subjects, for the Wisconsin Examiner. He spent 24 years as a freelance writer for Milwaukee Magazine, Isthmus, The Progressive, BNA Inc., and other publications, winning awards for investigative reporting, feature writing, beat coverage, business writing, and commentary. An East Coast native, he previously covered labor for The Milwaukee Journal after reporting for newspapers in upstate New York and northern Illinois. He's a graduate of Beloit College (English Comp.) and the Columbia School of Journalism. Off hours he is the Examiner's resident Springsteen and Jackson Browne fanboy and model railroad nerd.