Foxconn Technology Group on Friday formally objected to the Wisconsin Economic Development Corp. determination that the company would not qualify for tax credits for its capital investment and job creation in 2019.
The agency said Oct. 12 that Foxconn could not receive tax credits because it is no longer building a Gen. 10.5 LCD fabrication facility, opting instead for a smaller plant with more flexibility in which products it would make in Mount Pleasant.
State officials say they’ve taken the position since the spring of 2019 that Foxconn’s revised plans would not qualify for tax credits. The original plans would have required additional investment from Foxconn suppliers and an estimated $1.4 billion in annual supply chain purchases from Wisconsin companies. Those additional benefits helped justify an enhanced incentive package for the company, according to WEDC secretary and CEO Missy Hughes.
In it’s objection letter, Foxconn contends that its main obligation to the state is to invest in its facilities and create jobs.
“While there are numerous grounds on which the Recipients object, of significant concern is the WEDC’s position regard material terms and timelines,” Robert Berry, general counsel for Foxconn affiliate FEWI Development Corp., wrote in a letter to the agency’s chief legal officer.
“It has always been understood that the material aspects of the Recipients’ operations in the State of Wisconsin, with regard to the Agreement and obligations to the State’s taxpayers, are job creation and capital investment,” Berry added.
In a statement, Hughes confirmed the agency received Foxconn’s notification.
“At this time, WEDC has not received the basis for Foxconn’s objection to WEDC’s determination that the company is ineligible for state tax incentives,” Hughes said. “Once Foxconn is able to detail the scope and nature of its evolved project, WEDC stands ready to work on crafting a new agreement that balances the company’s needs with the interests of Wisconsin taxpayers.”
Foxconn’s contract with WEDC gives the company 14 business days to object to the agency’s calculations. Friday marked the last day the company could file its objection. The contract also says the two sides “agree to attempt in good faith to resolve any disagreement within 30 days of the objection.”
The section of the contract spelling out those timelines does not specify any next steps. In the objection letter, Berry says the company intends to work with WEDC over the next 30 days to resolve the disagreement “in a manner that benefits interested parties, including Racine County and the Village of Mount Pleasant.”
It is possible that the two sides could reach a new agreement, although they have discussed the possibility of that off and on for more than a year. Reporting by The Verge revealed that over the summer, Foxconn and WEDC signed an agreement that kept their talks over a 45-day period from becoming evidence in litigation or subject to public records.
Hughes said the period was productive, but it did not lead to a new deal.
It is also possible Foxconn could opt not to challenge WEDC’s decision further, continue its development of the Mount Pleasant campus, file its annual report for 2020 in the spring and seek tax credits again next year. However, without WEDC changing its mind or the agency having new leadership, it seems unlikely the company would suddenly be approved for tax credits.
“If the Recipients or other Foxconn affiliates wish to apply for benefits for future activities in the state, WEDC remains ready to work on a new arrangement,” WEDC chief legal officer Jennifer Campbell wrote to Berry in the letter informing Foxconn of the agency’s decision.
Of course, it is also possible the dispute could end up in court. Any legal challenge would need to be brought in the U.S. District Court for Western Wisconsin or in Dane County Circuit Court, according to the contract.
If the challenge were brought in the circuit court, any decision would be appealed directly to the state Supreme Court under the legislation that enabled the Foxconn incentives. That legislation also would automatically stay the lower court’s decision pending the appeal.
