More than half of the jobs Foxconn and its related entities committed to creating in
a new tax incentive deal with the state of Wisconsin are expected to be with Foxconn Industrial Internet’s U.S. subsidiary, according to Wisconsin Economic Development Corp. records.
Fii USA Inc. was added as an eligible recipient in the new contract, which also dramatically limited the tax incentives to Foxconn as the company scaled back its job and investment commitments.
The original Foxconn contract offered $2.85 billion in tax credits in exchange for the creation of 13,000 jobs and $9 billion in investment. The new deal offers $80 million in incentives in exchange for 1,454 jobs and $672 million in capital investment.
Even at less than 3% the size of the original deal, the incentive package is still larger than any other WEDC had awarded. Other large packages include $65 million for Mercury Marine, $60 million for Green Bay Packaging and $59.5 million for Komatsu Mining Corp.
Adding Fii as a recipient is one of a handful of changes in the contract beyond the smaller incentives. The publicly traded company was spun off from Foxconn in 2018, but had also been part of the investments being made on Foxconn’s Mount Pleasant campus. Without a change in the contract, it seemed unlikely that work would be eligible for tax incentives.
Fii is a major part of Foxconn’s plans for the site going forward with 792 of the planned 1,454 jobs being created by the company, according to a WEDC staff review of the new deal. Those positions account for all of the new hiring going forward as the review lists 601 jobs planned for 2020, none of which are at Fii.
Fii would also be responsible for around $106 million in capital investment at the campus, according to the staff review.
The contract was also changed to expand the definition of Foxconn’s project. The original deal called for the company to build a Gen 10.5 LCD fabrication facility aimed at making large televisions. By the spring of 2018, Foxconn had abandoned those plans in favor of a smaller Gen 6 plant that provided more product flexibility. The plans have continued to evolve over the last few years with a variety of products proposed.
In the new contract, the project is defined as investment related to “a technology and manufacturing ecosystem.”
Foxconn is planning facilities “for the manufacturing of data infrastructure and other operations related to high-performance computing, cloud computing, and artificial intelligence,” the staff review says.
The review adds that the company’s business pursuits in the state are not limited to data infrastructure and could also include electronic vehicles, digital health and robotics, using AI, semiconductor and 5G technologies.
“Foxconn stated that if customer demand and other market factors continue to drive its growth for data infrastructure, it could envision requiring additional facilities and employees in Wisconsin in future phases,” the review says.
Other contract changes include:
- A broader definition of forces beyond the company’s control that would prevent a contract default. The original deal included a number of factors like catastrophic accidents, acts of war or terrorism, natural catastrophes or unlawful work stoppages that would prevent an event of default from occurring. The new deal adds epidemics, pandemics and quarantines to that list.
- A requirement for Foxconn to make special assessment and makeup payments included in its development agreement with Mount Pleasant and Racine County.
- A change to what is excluded from the definition of “significant capital expenditure.” The original deal excluded investments in residential or commercial, non-industrial property or construction.” The new deal excludes residential, restaurant or retail property or construction.” It also adds a section on other ineligible capital expenditures, including advertising and marketing, property stabilization, interest, intangible asset, operating, maintenance and research and development expenses, and state and local permit fees.
The new deal also offers Foxconn an opportunity to earn tax credits on the more than $200 million in capital investment the company made in 2018 and 2019.
Starting in 2024, Foxconn will be eligible for $33,848 in credits for each full-time employee it has beyond 1,163. That credit would be capped at $9.85 million that year, a figure that would be equal to hitting the project job goal of 1,454. A similar credit, with the ability to carry over unused credits from the previous year, would be available in 2025.
