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Audit Faults Foxconn Credits for Work Outside WI

The first credits, worth up to $9.5 million, are part of a nearly $3 billion deal struck with the state, and could be awarded next year.

MADISON, Wis. (AP) — Wisconsin's economic development agency needs to modify procedures to ensure tax credits aren't awarded for Foxconn Technology Group employees who don't do work in the state, which would violate state law and the contract with the company, an audit released Wednesday said. 

The report from the nonpartisan Legislative Audit Bureau comes before any credits have been awarded to Taiwan-based Foxconn for its display screen factory and campus that's under construction in southeast Wisconsin. The first credits, up to $9.5 million, that are part of a nearly $3 billion deal struck with the state would be awarded next year.

When calculating what Foxconn employees qualify for meeting terms of the contract, only those working in Wisconsin count, the audit said. The Wisconsin Economic Development Corporation wrongly wrote guidelines that would allow Foxconn employees not doing work in the state, but who are paid in Wisconsin, the audit said. Awarding credits for out-of-state workers is contrary to both state law and the contract with Foxconn, the audit said.

The head of the economic development agency, Mark Hogan, said in a letter to auditors that WEDC believed employees outside of Wisconsin should be counted because they are being directed by the Foxconn operation in the state, resulting in their wages being subject to state income tax. But Hogan also said that WEDC will modify its procedures, if necessary, to comply with the contract and state law. The agency plans to update lawmakers on the status of its efforts by the end of January.

Republican state Sen. Rob Cowles, co-chairman of the Legislature's Audit Committee, said he looked forward to WEDC revising its procedures in accordance with the law. He said the report "uncovered a discrepancy that had the potential to cost Wisconsin taxpayers money." Democrats have been the loudest critics of the project, saying the state is spending too much. The credits are awarded based on jobs created and money invested.

Foxconn has said it may invest up to $10 billion and hire 13,000 people over 15 years at the complex near Racine, but critics say they doubt the company will follow through at that massive of a level. Outgoing Republican Governor Scott Walker negotiated the deal but his Democratic successor Tony Evers has said he would like to renegotiate it.

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