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Wednesday, May 22, 2013

Lessons for Silicon Valley on Capitol Hill

There were two stark object lessons for the technology industry in Congress on Tuesday. One showed the power of influence. The other showed the power of the iPhone.

In the Senate Judiciary Committee, the industry scored an enormous victory. It got its way on the immigration bill after Senator Orrin G. Hatch, Republican of Utah, told his fellow committee members that he would not vote for the bill unless they agreed to changes that Silicon Valley pushed for. It reflected an aggressive effort by the industry: companies have vastly expanded their lobbying budgets in Washington and dispatched executives to meet with lawmakers to push for an immigration overhaul. The latest, brashest entrant is an advocacy group led by Mark Zuckerberg, chief executive of Facebook, which raised huge sums of money to sponsor advertisements supporting several critical Republicans who back the immigration bill.

In the Senate Permanent Committee on Investigations, meanwhile, Apple‘s chief executive, Timothy D. Cook, testified. He was questioned by panel members about how Apple's subsidiaries had helped the company pay as little as one-twentieth of 1 percent in taxes on billions of dollars in income. Congressional investigators earlier this week unveiled a report detailing those tax diversions by Apple subsidiaries, based in Ireland but spanning other regions around the world.

Mr. Cook chose to take a low-key approach to the grilling, explaining that there was a difference in the tax rates that applied to the company's sales in the United States versus those abroad, where a majority of its sales took place. He insisted that Apple had paid what it owed in the United States.

Lawmakers may have been disarmed by Mr. Cook's tone. But they also gushed about the shiny toys that his company made, taking pains to praise the iPad, iPhone and MacBook laptop computer by name. “You managed to change the world, which is an incredible legacy for Apple,” said Senator John McCain, Republican of Arizona.

Apple may soon have to think about a legacy in Washington, which it has largely avoided unlike most of its peers in the industry. The company, based in Cupertino, Calif., spends very little in lobbying on Capitol Hill. And it has been largely invisible in even the immigration debate.

So too was another Silicon Valley company that was likewise known for having changed the world: Microsoft. Twenty years ago, it came under Justice Department scrutiny for antitrust violations. And only after that did it hire lobbyists to press its cause in Washington. Today, Microsoft is one of the highest industry spenders in Washington, investing $8 million last year.

Immigration has been one of its top issues lately. On Tuesday, Microsoft's general counsel, Brad Smith, sent out a congratulatory missive as soon as the immigration bill passed the Judiciary Committee. The bill, Mr. Smith said in his e-mailed statement, “will promote innovation, job creation and economic growth in the U.S. We look forward to supporting this critical bipartisan legislation as it proceeds to the Senate floor for a vote.”

Mr. Smith is among the contributors to Mr. Zuckerberg's lobby, called Fwd.us. It includes no one from Apple.