By SCOTT BAUER
MADISON, Wis. (AP) — Wisconsin’s economic development agency needs to modify its procedures to ensure that tax credits aren’t awarded to Foxconn Technology Group for employees who don’t perform work in the state, an audit released Tuesday said.
This is the second year in a row that the nonpartisan Legislative Audit Bureau has raised the concern. Foxconn, the world’s largest electronics manufacturer, is building a plant to manufacture display screens in southeastern Wisconsin. The project has yet to qualify for any tax credits related to job creation under a nearly $3 billion deal Foxconn struck with the state in 2017.
This latest audit raises even more questions about if Foxconn will ever qualify for any incentives.
In addition to underscoring the Wisconsin Economic Development Corp.’s need to verify that Foxconn is actually creating jobs in Wisconsin, the audit urges the agency to make sure Foxconn is spending money on equipment and construction at its campus in Racine County.
Foxconn’s plans in Wisconsin have shifted, especially after the defeat of then-Republican Gov. Scott Walker, who negotiated the deal and was a champion of the project.
Foxconn originally wanted to build a massive plant that would eventually employ 13,000 people in Mount Pleasant, but it decided this year to decrease the size of the factory to make smaller thin-film-transistor liquid-crystal-display screens for cellphones and other devices.
Gov. Tony Evers, a Democrat, has said Foxconn will receive no tax incentives until it modifies its deal with the state.
The Evers administration told Foxconn officials in November that the company would not qualify for any tax credits until its deal with Wisconsin is modified. Foxconn officials responded by accusing Evers of impeding progress on the project, according to documents first reported on last week by The Verge.
Under the current deal, Foxconn must employ a certain number of workers and make a certain amount of capital investment to receive part of the $2.8 billion in tax incentives offered it. Foxconn fell far short of its hiring goals last year and needs to hire at least 520 people in 2019 to qualify for as much as $221 million in credits.
Of that, Foxconn could be eligible for as much as $192.9 million in tax credits for capital investments – but only if it spends about $1.3 billion in 2019 and creates 520 jobs, according to the audit.
In early December, Foxconn said the lead contractors on the project, Gilbane and Exyte, had awarded about $350 million in construction work at its manufacturing campus in Mount Pleasant since it broke ground in spring 2018.
WEDC found in April that Foxconn could qualify for $14.9 million worth of tax credits next year because of capital spending on its manufacturing facility in 2018, even though the company hadn’t met the criteria for claiming the credits when the agency tallied them. This latest audit, though, notes that the spending figures sent to WEDC didn’t specify whether Foxconn had made those investments in Racine County site or somewhere else. To claim the tax credits offered by the state, the company has to prove its capital expenditures took place in the county.
WEDC told auditors that a certified public accountant will use a sample of capital expenditures and decide if they meet the criteria laid out by the contract for tax credits.
“If the CPA firm is unable to determine that Foxconn made certain capital investments in the zone, WEDC should not award Foxconn program tax credits for these capital investments,” according to the audit.
The audit also said that when the state is calculating which Foxconn employees qualify for meeting the terms of the contract, only those working in Wisconsin should count. WEDC wrongly wrote guidelines that would allow Foxconn employees not doing work in the state, but who are paid in Wisconsin, the audit said.
– The Associated Press contributed to this storyFollow @natebeck9