WEDC evaluating Foxconn's tax credit eligibility for initial 2018 capital investments
Despite Foxconn spending nearly $100 million on capital purchases in 2018, the state jobs agency won't yet say how many of those buys will qualify for related tax credits.
Over the first full year of its contract with the state, the Taiwanese technology company spent $92.7 million acquiring properties directly related to the project, in addition to $6.4 million on purchases like machinery and other equipment, as well as furniture and fixtures.
But the Wisconsin Economic Development Corp. isn't planning on verifying those investments until early next year, meaning it's still up in the air whether all of the money spent in 2018 would count toward capital investment tax credits in the future.
Still, Foxconn's ability to get those credits is contingent on not only its capital investments but its ability to hit job creation benchmarks, too.
To qualify for up to $192.9 million in capital investment tax credits for 2019, the company would have to spend about $1.29 billion and create at least 520 jobs that meet certain qualifications. And any eligible investments made after Jan. 1, 2018, count toward that spending total, per a Legislative Audit Bureau document shared with WisPolitics.com by Sen. Tim Carpenter's office.
The latest numbers from Foxconn come after the company announced it would fall short of the number of employees needed to earn job creation tax credits for 2018.
Carpenter, a WEDC Board member, said he's concerned about the unknowns that still exist about the Foxconn contract, including how WEDC would resolve issues related to clawbacks, environmental procedures and more.
"I'm afraid we're sort of stuck in this loop where it's going to be several years before we see the impacts and the fallouts from passing the Foxconn bill," the Milwaukee Dem said.
An agency spokesman said WEDC is still in the process of evaluating information from Foxconn to determine tax credit eligibility and that won't be finished until April 2020.
According to the state's contract with Foxconn, capital investment tax credits are earned based on the company's "significant capital expenditures." Those are defined as investments made in machinery and equipment being used in the Electronics and Information Technology Manufacturing Zone, as well as land and buildings in the EITMZ.
But since Foxconn's purchases from 2018 also include furniture and fixtures, as well as a number of items in the "other" category, it's unclear how much of the $100 million will count toward the $1.29 billion figure Foxconn needs to invest by the end of this year to earn the full capital investment tax credits.
If Foxconn fails to create 520 jobs by the end of this year, the capital investment tax credits the company can earn will be reduced. For example, if the company were to spend the entire $1.29 billion but only create 468 jobs -- 90 percent of the benchmark number -- then it would only receive 90 percent of the capital investment tax credits. In this case, Foxconn would receive $173.6 million rather than the full $192.9 million.
That example is from the LAB document received by Carpenter's office, which originally requested this information. LAB previously examined the state's agreement with Foxconn in a December audit.
Foxconn previously reported it had only created 178 jobs by the end of 2018. That was 82 jobs below the number required to earn any job creation-related tax credits for last year. It's also far short of the 1,040 job creation goal that Foxconn had agreed upon in its contract with the state.
The company submitted its capital investment figures to the state a year in advance of the required reporting date, and WisPolitics.com earlier this month obtained the document under the state's open records law.
See previous coverage of Foxconn's capital investment figures: http://www.wispolitics.com/2019/foxconn-reported-spending-nearly-100m-last-year-on-racine-co-project/