The Lobby: Intel's R&D tax push

intel_lobby.gi.top.jpgBy Jia Lynn Yang, writer


(Fortune) -- Name any major U.S. company, and chances are good it runs an office in Washington. They're all here to lobby, yes, but more specifically, they're watching the Hill, the White House, and regulators for any policymaking that could affect their businesses. In a new regular feature, Fortune.com will introduce you to one of these offices. We'll talk to the head lobbyist for that company and find out what policies they're pushing the hardest in Washington. We'll also talk to industry groups to see what's on their radar.

Intel (INTC, Fortune 500) opened shop in Washington during the mid-80s, starting out with only one person lobbying for the whole company. Now there are 15 employees, led by head lobbyist Peter Cleveland, whose official title is Intel's vice president of legal and corporate affairs and director of global public policy. Cleveland came to Intel in 2008 after spending 17 years on the Hill, where he last served as chief of staff for Sen. Dianne Feinstein, D-Calif. Cleveland shared with Fortune.com some of the company's priorities in Washington these days.

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Peter Cleveland, vice president of legal and corporate affairs and director of global public policy

Taxes and R&D credits

Companies enjoy a tax break when they increase their R&D spending by a certain amount, but Congress has to renew this part of the tax law every year. Intel, like many other tech companies, wants the credit to be permanent, "so we can plan appropriately," says Cleveland. Intel gets a $100 million bump from the credit annually and says it plows that money right back into R&D, engineering, and product development.

Another bone of contention is the federal corporate tax rate, which at 35% is on the high end among developed economies. Intel and others say this makes it hard for them to compete against foreign rivals. Sen. Ron Wyden, D-Ore., is proposing to reduce the rate to 24%. To make up for lost revenue, lawmakers would close some loopholes that allow multinationals like Intel to defer paying taxes on overseas profits. The company's CEO, Paul Otellini, has said he's open to some compromise.

Foreign worker visas

Tech companies have long bemoaned the cap on H1-B visas for foreign employees. This week Cleveland talked with Sen. Chuck Schumer, D-N.Y., about a bill Schumer's introducing with Sen. Lindsay Graham, R-S.C., that would award green cards automatically to immigrants who receive a master's degree or Ph.D. in science, technology, engineering, or math from a U.S. university. "These caps for H1-B visas and...green cards have been frozen in time for two decades," says Cleveland.

A change in policy could take a while though: it has to be included in comprehensive immigration reform, which includes perennially thorny issues like border security and undocumented workers.

Patent reform

Intel spends $75 million a year defending itself in court from allegations of patent violations. The company calls the plaintiffs patent trolls, and the cases are frequently filed in the Eastern District in Texas where judges and juries tend to be more sympathetic to the plaintiffs.

Sen. Patrick Leahy, D-Vt., chair of the Senate Judiciary Committee, has written a bill that would be the first comprehensive patent reform in 55 years. Some tech companies, like Intel, are battling with pharmaceutical companies over language in the bill on how to determine damages in these patent lawsuits.

Intel's products are often made of hundreds of thousands of parts. If the company loses a lawsuit over one small piece of that product, Intel wants to pay damages related only to that piece. By contrast medicine can't be divided up like this, so pharmas want damages to be based on the entire market value of the product.

Antitrust

Late last year, the Federal Trade Commission filed suit against Intel, alleging anticompetitive behavior. The FTC said Intel was coercing computermakers to install their chips rather than those of rivals like AMD (AMD, Fortune 500). Otellini shot back immediately, calling the case "misguided." The company has also said that added regulation would only hurt consumers by raising prices. Since the FTC announced its suit, Intel says it's been working with the agency to resolve the case. To top of page

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