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Amendment to Foxconn's contract could come with reduced tax credits
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Amendment to Foxconn's contract could come with reduced tax credits

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The state and Foxconn Technology Group appear to be nearing an agreement on amendments to the company's now 3-year-old contract  — which could result in Foxconn receiving fewer state tax credits than originally agreed upon.

Records obtained Friday by the Wisconsin State Journal provide additional details on the ongoing efforts between the Taiwan-based company and the Wisconsin Economic Development Corp. to reach an agreement on an amended contract. While Foxconn objected to WEDC's denial of tax credits in October, the company now says it's willing to accept a reduction in subsidies in exchange for a more flexible agreement.

"Foxconn is optimistic that an amendment to the WEDC Agreement is within reach," the company said in a statement Friday. "In response to market conditions that were unforeseeable three years ago, Foxconn formally came to the table with WEDC in August 2020 with a desire to lower taxpayer liability in exchange for flexibility that continues to incentivize future business development and job creation in Wisconsin."

Under Foxconn's original contract, the company would earn incentives totaling as much as $2.8 billion in state credits over 15 years as the company hired upwards of 13,000 employees and made a $10 billion capital investment in the state. State officials have told the company it will not receive state funds until the contract is amended, as the project being built in southeastern Wisconsin no longer matches what was promised in the 2017 agreement.

In a letter to state officials dated Nov. 23, Foxconn attorney Robert Berry detailed the company's disagreement with WEDC's denial of tax credits for jobs created and capital investments made last year, but also expressed a willingness to accept reduced tax credits "in exchange for a flexible business environment in Wisconsin."

Berry also detailed several objectives for an agreement, including an amendment that acknowledges:

  • The company as a contract manufacturer "and as such, an appreciation that we react to customer demands and market conditions that at times dictate what we manufacture."
  • An "expectation of bipartisan support from other governing entities pursuant to an agreement endorsed by the Governor and Foxconn."
  • Coming to an agreement in a timely manner that doesn't deter the company's "immediate opportunities to bring more investment and business to Wisconsin."

In response to Berry's email, WEDC Secretary Melissa Hughes said "fundamental to an initial award is an understanding of the company’s plans."

"Once Foxconn shares its investment projections with WEDC, we will work rapidly to calculate and outline the state’s potential incentive range," she wrote in the email.

Reaching out

On Dec. 2, Berry emailed Hughes indicating that company officials, including vice chairman Jay Lee, were ready to meet to have "an in-depth discussion and come to an understanding on the key terms surrounding an amendment."

"I am confident that after months of discussions we are on the brink of coming to acceptable terms that will lead to an exciting future for our smart manufacturing park in Mount Pleasant, and I believe we should be able to accomplish this objective at our meeting this Friday," Berry wrote.

State and company officials held a video conference two days later on Dec. 4. In an email sent to Berry the following week, WEDC chief legal counsel Jennifer Hagner Campbell described the meeting as "a productive discussion, and allowed WEDC to understand how Foxconn’s plans have evolved and adapted to the marketplace dynamics."

But before a new agreement can be reached, Foxconn will need to provide WEDC with updated details on how many jobs the company plans to create each year, as well as the type and amount of capital investments expected annually, Hagner Campbell said in the Dec. 11 letter.

"We agreed that next steps were for you to provide more detailed information about your plans, so that WEDC can conduct its analysis on available incentives," Hagner Campbell wrote.

A long road

Foxconn and state officials have been discussing potential updates to the company's original contract for well over a year, but so far have failed to reach an agreement.

The company was told late last year it would not receive billions of dollars in state subsidies until a new agreement was reached. In October, WEDC denied Foxconn's application for jobs and capital expenditure tax credits until officials with the company come to the table to draw up a new contract.

At the crux of the matter is Foxconn's 2017 contract, signed by former Gov. Scott Walker. That contract calls for a so-called Generation 10.5 facility that would build larger panels for TV screens, but the project has downsized to Generation 6, which would manufacture small screens for mobile phones, tablets, notebooks and wearable devices.

State officials have repeatedly said that, no matter how many jobs Foxconn creates, the contract is for a specific project that the company has so far failed to deliver.

$237 million cost

Foxconn has yet to receive any state dollars, while the project in Mount Pleasant already has cost the state nearly $237 million in state and local road improvements, sales and use tax exemptions, grants to local governments and for worker training and employment.

Last month, state Department of Administration budget requests and revenue projections for fiscal years 2022 and 2023 noted that WEDC assumes no state payments to Foxconn through June 30, 2023. Based on Foxconn's activities in 2018 and 2019, the company's ineligibility for state funds "will likely continue, as the company also does not appear to be on track for credit eligibility based on its calendar year 2020 activities,” DOA reported.

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Read more news coverage of Taiwanese electronics manufacturer Foxconn's decision to build a massive plant in Wisconsin.

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In October, the Wisconsin Economic Development Corp. denied Foxconn's application for jobs and capital expenditure tax credits until officials with the company come to the table to draw up a new contract.

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