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Michigan, Fiat Chrysler reach deal on tax credits; company must spend $1B to get maximum $1.9B

LANSING, Mich. — Fiat Chrysler will have to spend an additional $1 billion on Michigan facilities over 15 years to qualify for $1.9 billion in business tax credits under an agreement approved Tuesday by the state's economic development board.

The deal, the second with a Detroit Three automaker this year, is designed to help Michigan get a better handle on billions in tax incentives given to keep auto jobs in the state, primarily during the economic downturn. The redemption of higher-than-expected credits led to mid-budget year spending cuts in February.

The agreement amends a 2010 deal between what was then Chrysler Group LLC (now FCA US LLC) and the former Michigan Economic Growth Authority. The carmaker at the time was offered what was projected to be $1.3 billion in tax credits through 2031 for a maximum of 20,000 retained jobs in the state.

The credits are worth more, though — nearly $2 billion — because of higher wages and other factors.

The new deal caps Fiat Chrysler's maximum credits at $1.93 billion through 2029 and gradually increases the number of retained jobs the company can claim to 27,000. It also set annual limits on the tax credit value that may be claimed in a given year.

In a statement, FCA said the revised agreement provides greater economic certainty for all parties.

The Michigan Strategic Fund board approved a similar deal with Ford Motor Co. in June.

State officials have reported trouble forecasting the budget ramifications of an estimated $9.5 billion tax credit liability because of timing issues and uncapped growth in wages, health care benefits and businesses' investment in an improving economy. The state stopped awarding new business tax credits beginning in 2012 under a new tax code — in favour of direct cash incentives and loans — but the old credits will continue having a budget impact.

David Eggert, The Associated Press

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