Foxconn Tax Benefits on Table in Wisconsin Special Session

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By Michael J. Bologna

The Wisconsin Legislature will begin debating an unprecedented business development bill Aug. 1 designed to provide Foxconn Technology Group $3 billion in tax benefits over 15 years.

Gov. Scott Walker (R) July 28 called for a special legislative session just two days after Foxconn, the world’s largest contract electronics manufacturer, announced its plan to build a 20 million-square-foot campus in southeastern Wisconsin for the production of liquid crystal display panels for televisions and electronic devices. The company expects to invest $10 billion in the project and to hire thousands of direct employees.

Walker called for quick legislative action and bipartisan support, saying the high-tech “Wisconn Valley” campus would also generate thousands of indirect jobs.

“I am encouraged by the bipartisan support we have seen for Wisconn Valley, and I call on the Legislature to support this measure and open the door for 13,000 direct Foxconn jobs, 10,000 direct construction jobs, and 22,000 more indirect or induced jobs related to this project,” Walker said in a statement. “This is good for our entire state.”

Walker released draft legislation ( Legislative Reference Bureau-4050/1) authorizing the Wisconsin Economic Development Corporation (WDEC) to create a single “electronics and information technology manufacturing zone.”

The bill directs WEDC to authorize up to $2.85 billion in income and franchise tax credits to a business operating in the manufacturing zone, presumably Foxconn. The manufacturer, however, would have to meet certain investment and job-creation targets to qualify for tax benefits. Generally, Foxconn would be eligible to earn tax credits equal to 17 percent of wages paid or 15 percent of capital invested over 15 years.

Clawback Provisions

The state could also claw back benefits if Foxconn supplies false information to obtain credits, leaves the zone to conduct the same business activity, or ceases operations.

The bill permits a $150 million sales and use tax exemption on purchases of building materials, supplies, and equipment used for the campus construction project.

The proposed law establishes special rules for the operation of a tax incremental financing district (TID) linked to the manufacturing zone. The municipality establishing the TID could use the district to pay for certain improvements required by Foxconn, and the investment period would extend for 30 years, rather than 20 years under current law.

In addition, the bill loosens a series of environmental and public service requirements that would normally apply to a project of this complexity and size. It also permits the state to provide grants to municipalities for certain costs associated with the development of the manufacturing zone.

Protecting Taxpayers

Assembly Minority Leader Peter Barca (D) expressed general support for the Foxconn project and the legislative process requested by Walker. At the same time, he said lawmakers will need time to question company officials, discuss the project with local units of government, and consider a wide range of potential community and environmental impacts.

“There are still many unanswered questions that I hope will be answered in the upcoming public hearing,” Barca said in a statement. “There should also be time following the hearing but before a vote is held to address any issues that might arise. Wisconsin residents, local officials and taxpayers need time to consider this sizeable investment.”

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

For More Information

Text of L.R.B. 4050/1 is at http://src.bna.com/rfU.

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