The transformations the bill had already undergone since its introduction in Congress illustrate the difficuIty of achieving cooperation between government and private enterprise, particularly where business interests are themselves divided. The Apple bill asked for two federal tax breaks. A corporation cannot claim more than 10% of its annual federal taxable income as a charitable deduction, regardless of how much it contributes to eligible nonprofit causes. On the ground that donations of computers and related hardware to elementary and secondary schools met a pressing national need, Steve Jobs urged that this limit be upped to 30%. Both the House Ways and Means Committee and the Senate Finance Comrnittee refused to go beyond 10%.
The House did go along with a second request, although the Senate Finance Committee would go only part way. Here the issue centered on how much of the value of each computer donated to a school could be deducted from taxable income. Normally, a corporation can deduct only its direct cost of making the donated goods. It cannot deduct the additional amount above cost that would be part of the price the goods would bring if sold. There are two exceptions. One is when essential goods (food and medical supplies) are given to charitable organizations. The other is when scientific equipment is donated to a U S. college or university for research or research training in the physical or biological sciences (Sec. 170 [e] [4] of the Internal Revenue Code). For either of these gifts, the donor may deduct cost plus half the added amount the goods would bring in the marketplace. The special rule has a further limit: The cost plus the added half of the difference between cost and fair market value may not exceed twice the cost. (If you are dizzy, bear up; that is why tax lawyers and tax accountants are so well paid. They spend their lives inventing and keeping up with stuff like that.)
Apple asked for this same "special rule" treatment for computer equipment. The Senate Finance Committee compromised by setting a limit of 150% of the cost. The House also provided for only one year in which the contribution would be eligible -- 1983. The Senate Finance Committee allowed the deduction to be taken in 1983, 1984, or 1985.
There were other changes. Donated equipment couldn't be more than six months old. That requirement was to counter the argument that the entire proposal was really a scheme to dump excess and stale inventory.
Two other provisions were even more serious obstacles to Apple's plans. The House version required that donors have a "written plan of distribution" in order Senate version specified that no one to avoid "undue concentration" either geographically or in terms of the relative economic status of different areas. The Senate version specified that no one state's schools could have gotten more than 15% of the contributions from any one company and added that no more than one-third of the computers given could go to "donees where the median income of families with school age children exceeds the national average." Moreover, at least one-third of the computers would have had to go to schools where the median family income is below the national average.
If you have had no experience with what the Internal Revenue Service or the courts can do with language like that, you are lucky. It can be particularly troublesome when, as in this case, the language went on to give the Treasury the right to vary the percentages "based on the facts and circumstances of such cases."
These restrictions -- and the death of the bill -- were due to mistrust of Apple's motives. While Jobs hammered away at national need, others suggested the bill was simply a clever ploy to hook teachers and students on Apple software by tying them to Apple hardware. Jobs argued that the bill would let any computer maker do the same thing.
Some industry opposition was surely rooted in a reluctance to give up the schools -- even for a short time -- as a lucrative market. Some companies other than Apple have entirely different strategies for the school market. It simply doesn't make sense to them, for example, to give machines to schools rather than sell the hardware at a discount. Still others think they are doing better in the marketplace than if the bill forced them -- and allowed others -- to donate machines in order to keep a competitive position.
Jobs pointed out that Apple would have gotten no free ride; the bill would have left the company with a "monumental indirect cost burden" and an unrecovered cost of at least $100 per computer. Apple could have paid more than $10 million if it had given a computer to each of the more than 100,000 eligible schools in the country. To counter the argument that the bill would have given Apple an inside track, Jobs simply invited "IBM, Digital, Xerox, and Commodore to join with us. If these and other microcomputer manufacturers will undertake their share of the responsibility to insure computer literacy in this country, Apple's goal will be achieved at a much lower cost to our company."
"This brings me," Jobs told the House Ways and Means Committee on June 14, "to what is truly important about H.R. 5573. While the bill may someday benefit any company that donates computers under its provisions, the important point is that the bill is clearly good for the United States. Hopefully we have not come to the point in this country where any law that may be even remotely good for business automatically is perceived as bad for the country. In the area of technology particularly, that perception is fatal to the long-term well-being of America. "
It may be true that everyone's motives, including Apple's, are somewhat mixed. But the late Charles Abrams, scholar-lawyer-businessperson, used to explain to his students at Massachusetts lnstitute of Technology that businesspeople are moved by the "prophet motive" as often as other people are. One of Jobs's colleagues told me that on this issue Jobs's motives were probably "75% prophet ancl 25% profit." Maybe I'm getting soft, but after reviewing the entire controversy, that seems about right to me.
One fair question to ask now is whether any single company can take on this big an initiative by itself. And, if it does, can it really expect to win it?
But what Jobs attempted raises far broader questions than one company's efforts can resolve. Can the nation leave computer-literacy decisions to the school administrators of the 50 states and to thousands of school boards, particularly when schools are strapped for money? Can it leave the issue to 900-odd hardware makers -- or to the 20 or so largest -- when each of these manufacturers is struggling for market share? Can it leave it to education lobbyists who allegedly want teachers and administrators to agree unanimously on appropriate school software before any hardware makers get a chance to lock schools into one way of doing things?
These are the questions the Apple bill raises. All of us must now face them. How we do so will govern how we move into a rapidly changing era.
