Foxconn can earn tax credits on work performed outside Wisconsin, audit says

WEDC reviewing recommended changes

Last updated on July 2nd, 2019 at 09:11 pm

Foxconn Technology Group could earn some of the $1.5 billion in payroll tax credits it is eligible for on work performed by employees outside of Wisconsin, according to a report of the Legislative Audit Bureau.

The company reached a deal with Gov. Scott Walker to receive $3 billion in tax breaks from the state in exchange for creating 13,000 jobs and investing $10 billion in an LCD manufacturing campus in Mount Pleasant. The campus is part of an electronics and information technology manufacturing zone created by the state. Foxconn can receive payroll tax credits for jobs created within the zone or outside the zone but within the state.

The LAB report, however, found that the Wisconsin Economic Development Corp. has written procedures that allow credits to be awarded for “any employee that does not live in Wisconsin and is designated as ‘remote’, ‘working at home’, or ‘sales.’”

“These written procedures do not comply with statutes or WEDC’s contract because they allow WEDC to award program tax credits for the wages of employees who do not perform services in Wisconsin,” the audit report says.

The LAB recommended WEDC bring its policies in line with state statute and the Foxconn contract.

In a written response included in the report, Mark Hogan, secretary and chief executive officer of WEDC, said the agency is researching the LAB’s recommendations and would make changes if necessary.

He noted that questions about Foxconn hiring outside Wisconsin came up during public hearings for the legislation that created the company’s tax credit program. At the time, the agency indicated non-resident wages subject to state income tax would qualify for tax credits as would those earned by residents of states Wisconsin has reciprocity agreements with.

“These provided the basis for WEDC including these wages as those eligible to receive tax credits,” Hogan wrote.

He said the zone was created to limit where the company could earn its $1.35 billion in capital investment tax credits, but the contract language was also intended to encourage Foxconn to spread jobs across the state.

The LAB report also noted Foxconn would not necessarily have to create 13,000 jobs to receive all $1.5 billion in tax credits. The company could earn all available credits if it created 10,400 jobs with an average payroll of $69,900, compared to the required average of $53,875.

BizTimes reported in July that how to determine the average annual payroll was among the issues during contract negotiations between Foxconn and the state. While wages above $100,000 are not eligible for tax credits, annual wages up to $400,000 do count towards the average. The company initially wanted all wages to count towards the average while the state wanted the number capped at $100,000.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He spent also five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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