Some Wisconsin lawmakers are doubting Foxconn Technology Group’s commitment to job creation after it failed to qualify for state tax credits last year under a $3 billion subsidy and development pact heralded by President Trump as an example of resurgent U.S. manufacturing.
Assembly Minority Leader Gordon Hintz (D) expressed concerns that Foxconn would fall far short of the 13,000 jobs it pledged to create under a deal regarded as the richest tax credit, exemption, and subsidy package in state history. The concern came into focus in a letter to the Wisconsin Economic Development Corporation (WEDC) in which Foxconn confirmed it missed job-creation targets for 2018.
In addition, recent news accounts suggest Foxconn is rethinking its manufacturing plans in Wisconsin and adjusting its global employment strategy. Foxconn is the world’s largest contract electronics manufacturer and produces displays for computers, tablets, and mobile devices like Apple Inc.'s iPhone.
“Foxconn reiterated the jobs promise, but it’s getting less likely that they will hit their targets. And we just don’t know what the final project will look like,” Aaron Collins, a spokesman for Hintz, told Bloomberg Tax Jan. 22.
Foxconn doubled down on its jobs commitment in Wisconsin in the letter, but acknowledged it had hired only 178 workers in 2018. The company also conceded in the letter it has adjusted its recruitment and hiring timeline.
Greg LeRoy, executive director of the economic development research and advocacy organization Good Jobs First and a frequent critic of the Foxconn deal, said the company’s letter highlights moving 4 million cubic yards of dirt in Wisconsin while burying details about hiring shortfalls.
“You know Foxconn is behind in its job commitments when, before jobs, it cites how many cubic feet of dirt it has moved,” LeRoy told Bloomberg Tax in an email. “I remain skeptical that the Foxconn project will ever play out as advertised. And although the company didn’t claim its first state payment, state and local taxpayers are still incurring other costs for this deal.”
Trump’s Trip to Wisconsin
In June 2018, President Trump joined Foxconn executives to break ground on a $10 billion investment in southeastern Wisconsin. Foxconn, the operating arm of Taiwan-based Hon Hai Precision Industry Co., plans to build a 20-million-square-foot manufacturing campus for the production of liquid crystal display panels.
Legislation signed by former Gov. Scott Walker (R) authorized the state to issue up to $2.85 billion in income and franchise tax credits to Foxconn over 15 years. Lawmakers also granted Foxconn up to $150 million in sales and use tax exemptions on purchases of building materials, supplies, and equipment used for the construction project. Hundreds of millions more has been promised in the form of local subsides and infrastructure improvements.
Good Jobs First calculates the cost to Wisconsin taxpayers at more than $4.5 billion. The organization points to state commitments of $252 million for road and infrastructure improvements, a Tax Increment Financing district from the Village of Mount Pleasant valued at $1.49 billion, and $50 million for land acquisition from Racine County. In addition, Wisconsin has offered workforce development assistance and exemptions from state environmental standards.
In the Jan. 17 letter to WEDC, Foxconn said it wouldn’t seek tax benefits from the state for 2018.
Dr. Louis Woo, a special assistant to Foxconn Chairman Terry Gou, said the company had created 178 full-time positions in Wisconsin—82 short of the 260 positions required under the pact. He noted that the project has generated 1,032 jobs overall, but most were linked to construction of the campus and don’t qualify for tax benefits.
Collins said the announcement is part of a pattern in which Foxconn makes elaborate promises to state economic development officials to gain tax benefits and then dials down expectations over time. He also pointed to Woo’s comments to Wisconsin business publications last summer suggesting Foxconn would likely build a more modest facility in Wisconsin to produce smaller display panels. The company initially pitched the state on a plan for a highly sophisticated facility capable of producing large glass panels for television screens and other large electronic devices.
Mark Maley, a spokesman for WEDC, said Foxconn could retroactively claim tax benefits for 2018.
The pact establishes a maximum goal of 1,040 jobs for 2018 to be eligible for $9.5 million in job creation credits. Such benefits could be claimed this year if Foxconn exceeds its jobs target. To gain such carryover benefits, however, Maley said the company must first hit its 2019 job creation maximum target of 2,080.
Woo’s letter raised questions about Foxconn’s job-creation plans in Wisconsin.
“While we remain committed to creating 13,000 jobs in Wisconsin, we have adjusted our recruitment and hiring timeline,” he wrote. “As a company with operations around the world, we need to have the agility to adapt to a range of factors including global economic conditions.”
Woo pointed to other yardsticks of success in Wisconsin beyond hiring. The company had invested more than $200 million in the state and completed construction of a 120,000-square-foot multipurpose building as part of the evolving tech campus.
WEDC chief executive Mark Hogan issued a supportive statement, stressing that Wisconsin taxpayers will be protected throughout the Foxconn development process.
“WEDC’s contract with Foxconn clearly states tax credits will only be awarded when Foxconn meets its annual job creation and capital investment requirements. Since that did not occur in 2018, the company will not receive any credits this year,” Hogan said. “Foxconn remains committed to creating 13,000 jobs and we look forward to working with the company as it continues to build out the Wisconn Valley Science and Technology Park and its other investments throughout Wisconsin.”
To read more from Daily Tax Report: State pleaseOR Request Trial