Columnist: Hiring ‘loophole’ could net Foxconn investment tax credit

    A Foxconn electronics factory in China. (Photo by Steve Jurvetson via WikiMedia Commons)

    Was a year-end surge in hiring at Foxconn Technology Group in Racine County timed to ensure it could collect a $52.5 million tax credit for 2019?

    Bruce Murphy, editor of the news website Urban Milwaukee, raises that question in a column published Tuesday.

    Foxconn told the Milwaukee Journal Sentinel in mid-December that hiring would surpass 520 employees by the end of 2019.

    The Foxconn plant in Mount Pleasant hadn’t shown signs of activity or workers up to that point, Murphy notes — but days later, the parking lot at the company’s multipurpose building was packed.

    At 520 employees, that would be enough to qualify it for tax credits under the contract that the state and the company signed in November 2017. But as Murphy notes in his column, “that wouldn’t get the company much, because the contract awards the employment tax credits on a monthly basis for actual job hours worked.”

    Another provision in the contract, however, indicates that the late round of new jobs would qualify the company for a capital investment tax credit of 15% — $52.5 million on the $350 million the company has said it spent in 2019 on capital investments.

    The capital investment tax credit provision also requires the company to meet the jobs quota. But unlike the jobs credit, the investment credits aren’t paid based on monthly hours worked, just on year-end employment, Murphy points out.

    To qualify, the job total “may include ‘Partial Year Employees who are employed in Full-Time Jobs as of the end of the period’ — by December 31,” Murphy writes, quoting the contract.

    “So the sudden addition of more workers in December at the Mount Pleasant campus would allow the company to collect the capital investment tax credits,” Murphy writes. And Milwaukee lawyer Matt Flynn, who ran for the Democratic nomination for governor in 2018 on a threat to sue to stop the Foxconn deal, told Murphy that those same employees could be laid off “in the spring or summer or any time” once they qualified the company for the tax credits.

    Murphy writes that after initially disputing that interpretation of the contract, Wisconsin Economic Development Corp. (WEDC) spokesman David Callender told him that the agency would not comment on “hypothetical scenarios,” but would follow “our standard, rigorous process to verify jobs and capital expenditures per the current contract” once an application is submitted.

    “Clearly this is a loophole,” state Rep. Gordon Hintz (D-Oshkosh), the Assembly minority leader and WEDC board member, told Murphy. “I would like us to take this issue up with the board.”

    Hintz also told Murphy he doesn’t believe Foxconn’s current employment is as high as 520 workers.

    Neither Foxconn, Assembly Speaker Robin Vos (R-Rochester) nor Senate Majority Leader Scott Fitzgerald (R-Juneau) responded to Murphy’s request for comment.

    Murphy’s column can be found on the Urban Milwaukee website

    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.