News Story

Michigan Taxpayers Writing Check to Second Electric Car Battery Maker for $100 Million

The operators of another Michigan electric car battery plant, A123 Systems, will receive a $100 million cash subsidy from the state for a 75-acre facility the company has leased in Romulus. The subsidy will be in the form of cash because the plant has been granted "renaissance zone" status by the Michigan Economic Development Corp.

Declaring the facility a renaissance zone has the effect of converting a previously authorized $100 million "refundable" tax credit for the firm into an outright cash subsidy (rather than some-subsidy and some-tax break). The legislation authorizing the conversion was signed by Gov. Jennifer Granholm in May after being approved by votes of 99-7 in the House and 38-0 in Senate.

The A123 Systems renaissance zone award actually preceded one to the Korean firm LG Chem for a Holland plant, as reported in Michigan Capitol Confidential on July 2 (see "Michigan Taxpayers to Write $100 Million Check to Korean Battery Maker"). Both facilities will now be exempt from virtually all site-specific state and local taxes for 15 years, including the Michigan Business Tax and most property taxes.

In 2009, the Legislature authorized $100 million "refundable" business tax credits for both A123 Systems and LG Chem.* "Refundable" means that the state will send the companies a check for however much of the credit remains after it cancels any Michigan Business Tax liability.

Because of government secrecy imposed by the Michigan Department of Treasury, however, residents may never have learned just how much of these $100 million "credits" would have gone out in the form of cash subsidies. With the granting of renaissance zone status the answer becomes known: All of it, because the firms won't owe any state taxes on their facilities. Each company's $100 million in cash will be handed out in four annual $25 million installments.

According to documents it filed with the federal Securities and Exchange Commission, Massachusetts-based A123 Systems is the beneficiary of a raft of other tax breaks and subsidies provided by Michigan taxpayers, including an outright $10 million grant authorized in March of 2009, another $4 million grant in the form of forgiveness for a state loan, a $2 million "marketing" grant, and as much as $25 million in additional tax credits depending on how many workers it hires, up to a maximum of 300 jobs. (The jobs credits will also become cash subsidies given the renaissance zone status.)

A123 Systems is also the recipient of federal subsidies and loans, including a $249 million grant of "stimulus" deficit spending money approved last August.

* See House Bill 4515 sponsored by Rep. Dian Slavens, D-Canton Township, Senate Bill 319, sponsored by Sen. John Pappageorge, R-Troy, and Senate Bill 466, sponsored by Sen. Wayne Kuipers, R-Holland.


Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.