HP DONATES BIG TO REPUBLICAN CANDIDATES

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HP Rides The Innovation Wave In Washington
WASHINGTON, D.C. -Last week, Hewlett-Packard savored some legislative good news when President Bush signed a bill boosting federal subsidies for research and education in science and math. The Palo Alto, Calif., computer giant, which in 2006 spent $3.6 billion on research and development, has been one of the louder voices calling for the U.S. government to step up its role in fostering tech innovation.”We’re very pleased with the commitment to put more money into research and to contribute math and science scholarship,” says Gary Fazzino, Hewlett Packard’s vice president for government and public affairs. “These are victories.”Now, Fazzino and HP’s six-person government affairs outpost in Washington hope that momentum on innovation will carry along two other top priorities: patent reform and an extension of the research and development tax credit. While both items enjoy decent support inside the Beltway, they’ll need tending to, given the prospect of a hectic autumn on Capitol Hill.

“There could be a number of landmines along the way,” says David Isaacs, who runs HP’s public policy efforts in Washington.
For a tech outfit, HP is relatively well-equipped to handle political landmines. The registered lobbyists in its Washington policy office complement a battery of outside lobbying and PR firms. According to the Center for Responsive Politics, HP’s political action committee (PAC) contributed $254,050 during the 2006 federal election cycle, a number bested only by Microsoft , Intel and Siebel Systems now a unit of Oracle  among tech-industry PACs. Some 60% of HP’s PAC dollars went to Republican candidates.Leading the charge from Palo Alto is Fazzino, who first joined HP 30 years ago. Beyond holding a bevy of state- and federal-level tech policy jobs, Fazzino’s been a pol himself. He served five terms on Palo Alto’s City Council and twice as its mayor.Over the years, Fazzino has seen HP sharpen its elbows in the political arena. When he started, he says, the company tended toward an academic approach, crafting big-picture white papers and relying on trade associations to do political work.

These days, HP is more hands-on politically. The company, also one of the biggest U.S. government contractors, regularly sends its brass to Washington to do advocacy. It has also developed an internal, voluntary “government affairs network” that invites employees to contact elected officials about issues important to HP.”Now that we are clearly a consumer company, our executives are far more engaged on government affairs and the political process than they were 20 years ago,” says Fazzino. “We’re much more focused on issues that have a direct impact on the bottom line.”One item with bottom-line impact is the research and development tax credit, a law that’s been extended 12 times since its enactment in 1981. In 2006, the R&D credit knocked a percentage point off HP’s 35% statutory federal income tax rate (with other adjustments, HP’s effective tax rate came to 13.8% for the year).While it has occasionally been allowed to lapse during its 26-year history, the R&D credit has no shortage of proponents. In signing the math and science bill last week, President Bush called for making the measure permanent, a goal shared by HP and others throughout the business community.Still, HP doesn’t expect an easy layup here. Why? “The R&D tax credit is deemed to be a cost,” explains David Isaacs, “and under the pay-go rules of the Democratic congress, there needs to be a pay-for, either a tax increase or a spending reduction of commensurate size.”Patent reform is another priority on which HP, holder of 30,000 patents, is bullish. Isaacs notes that the topic is part of House Speaker Nancy Pelosi’s “innovation agenda,” a package of proposals on which Fazzino gave his input as it was being crafted.As detailed here, bills to overhaul patent system have made it out of House and Senate Judiciary committees. Isaacs and Fazzino expect patent legislation will make it to the House floor in September. “The Senate is a much more challenging situation,” says Isaacs. “We’re looking forward to getting it done in ’07.”

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September 14, 2007 at 11:07 AM