BUSINESS

Foxconn confident it has enough jobs to get tax credits for this year, but last year many were disqualified

Rick Romell
Milwaukee Journal Sentinel

Foxconn Technology Group now has more than 520 Wisconsin employees — the threshold number needed to qualify for state tax credits, a key executive says.

If so, it would be a turnaround from last year, when the company fell well short of the minimum required to collect its first installment of taxpayer funding under the 2017 development agreement with the state.

Foxconn Vice Chairman Jay Lee.

“The end of December we’ll have a number well beyond what we’re supposed to,” Foxconn Vice Chairman Jay Lee said in an interview during a company event last week at the Hilton Milwaukee City Center.

"We're confident we'll make the number which are certified eligible" for credits, he said.

Lee also said initial production at the factory Foxconn is building in Mount Pleasant, which is to begin next year, will involve such areas as “smart storage,” high-performance computing and “some display technologies.”

Full-blown manufacturing of thin film transistor liquid crystal displays — the devices Foxconn has said it is building the factory to produce — will come later, Lee said.

“That will be probably 2022,” he said.

Foxconn won’t get job-creation tax credits for 2019 until after the Wisconsin Economic Development Corp. reviews the company’s submission and certifies that enough employees qualify.

Last year, the agency disqualified 40% of the jobs the company had said were eligible for credits. Foxconn ended 2018 with 113 qualifying Wisconsin employees, the WEDC concluded after its review of the company’s submission.

That was less than half the 260 workers Foxconn would have needed to get its first slice of the potential $1.5 billion in job-creation tax credits provided in the state contract. It also was well below the 189 employees Foxconn had designated as eligible.

Asked about the disqualification of employees in 2018, the company said in a statement:

"Foxconn has hired hundreds of hardworking employees over the last year and throughout the process has learned from past experiences how to minimize disqualification for Foxconn employees. Foxconn will continue to comply with the reporting requirements as prescribed in the agreement with WEDC for employees hired during the 2019 reporting year.” 

FULL COVERAGE:Foxconn in Wisconsin

Under the state contract, the company can get a tax credit covering 17% of its payroll for eligible employees. The credit is refundable, meaning the state will write a check to Foxconn if the firm doesn’t have tax liability — a strong possibility given the way Wisconsin taxes manufacturing.

Without knowing Foxconn’s 2019 payroll or how many employees it will finish the year with, it’s impossible to know how much the firm will get in job-creation tax credits. The company will have until April 1 to file payroll information with WEDC, and the agency’s subsequent review could take a few months.

Whatever the timing on the jobs credits, Foxconn stands to receive far more through another key provision of the contract that pays the firm for its “significant capital expenditures” in the special development zone created by state law in Mount Pleasant.

The contract calls for the state to give Foxconn tax credits equal to 15% of such spending, which includes expenditures on land, buildings, machinery and equipment. Those credits also are refundable.

Foxconn said last week that it so far has awarded about $350 million in construction contracts for work in Mount Pleasant. Fifteen percent of that would come to $52.5 million, though it isn’t known how much the company has spent under the construction contracts to date.

Whatever the final employment and investment numbers for 2019, Foxconn will have far to go to fulfill its initial promises to invest up to $10 billion in Racine County and create up to 13,000 Wisconsin jobs.

Contact Rick Romell at (414) 224-2130 or rick.romell@jrn.com. Follow him on Twitter at @RickRomell.