WEDC disputes audit finding Foxconn still eligible for tax credits for out-of-state employees

WEDC policies continue to allow the awarding of tax credits to Foxconn for employees working outside of Wisconsin despite a vow last year to make changes ensuring that wouldn’t happen, according to a new Legislative Audit Bureau report.

But Wisconsin Economic Development Corp. CEO Missy Hughes insists the agency has already “explicitly disqualified any employee who did not perform services in Wisconsin” and has made other changes that LAB recommended in an audit last year.

The agency and LAB also disagree on other details of how the credits should be determined, prompting a rare rebuttal from state Auditor Joe Chrisman to Hughes’ response to the audit.

The Wisconsin Economic Development Corp. made changes earlier this year to its written procedures for the tax credits after a 2018 audit. That LAB report found the agency’s policies allowed rewarding the company for paying employees not living in Wisconsin who were designated as “remote,” working from home or in sales so long as they were paid for work in the manufacturing zone around the company site in southeastern Wisconsin.

But the audit found those changes still leave the door open to paying credits for services performed outside Wisconsin. That’s because they fail to reference state statutes stipulating WEDC may not certify credits for services performed outside Wisconsin. Instead, they reference provisions in state statutes and administrative rules that define a corporation’s payroll. That definition includes wages paid for services performed outside of Wisconsin.

The audit recommends changing those written procedures to explicitly require the awarding of credits only for wages paid to employees for services performed in Wisconsin.

The audit comes on the heels of documents showing the Evers administration doesn’t believe Foxconn currently qualifies for state tax credits, because the scope of the project has changed significantly compared to what was first envisioned when the contract was signed under former Gov. Scott Walker.

The project was originally slated to be a Gen 10.5 manufacturing facility producing thin glass screens the size of garage doors. It has since been scaled back to a Gen 6 factory, which produces smaller screens.

Under the state contract, the company is eligible for tax credits both for jobs created and capital investments. The job credits are restricted to jobs paying at least $30,000 annually that also offer benefits such as health care.

In 2018, the first year it was eligible for the jobs credits, Foxconn created 113 jobs. That was short of the minimum 260 needed to qualify for the credits, which equal 17 percent of wages. The credits are capped at $100,000 in salary for an employee.

The audit also found while no tax credits were awarded for 2018, WEDC failed to comply with its contract when it calculated wages that Foxconn paid in 2018 and that were eligible for tax credits. But Hughes wrote in her response the agency believes LAB is taking “an exceedingly narrow interpretation of the contract language” that would result in an overpayment of tax credits.

The subjects of LAB reviews often submit a response to the audit that is included in the report. But Chrisman also included in the report a rebuttal to Hughes’ response that hits on four points related to the job credits.

Chrisman didn’t immediately respond to a request for comment on why the rebuttal was included in yesterday’s report.

Read the report: