Lawmakers have extended the R&D tax credit, which was originally passed in 1981. The Congressional Budget Office has previously determined that the credit appears to have a positive effect on innovation.
This week's last-minute agreement to avert the "fiscal cliff" extends a law that made mortgage insurance premiums tax deductible. The deal also extends for one year the Mortgage Forgiveness Debt Relief Act of 2007, which exempts from tax liability the principal that homeowners are forgiven during a short sale or write-down. Lawmakers did not make changes to the mortgage-interest deduction, though that issue could come up again as part of a long-term deficit-reduction plan.
The technology industry is applauding lawmakers for extending the research-and-development tax credit through 2013 as part of the "fiscal cliff" package passed by Congress this week. "The R&D credit has been, and will remain, a cost-effective policy for increasing research activity and producing a dollar-for-dollar increase in research spending," said Telecommunications Industry Association President Grant Seiffert.
The stock market rallied on news that Congress and the White House reached a resolution on the "fiscal cliff." The Dow Jones industrial average rose 2.4%, the S&P 500 increased 2.5%, and Nasdaq gained 3.1%. The rally ignored that spending cuts had been pushed off to March and another standoff, this time over the debt ceiling, is expected within weeks.
The House voted 257-167 to adopt the Senate's bill to avert "fiscal cliff" tax increases for most Americans. The measure prevents $600 billion of spending cuts and tax hikes from automatically taking effect. House Republicans gave up on demands for spending cuts that likely would have been blocked by the Senate.
The "fiscal cliff" deal passed by Congress includes tax-credit extensions for cellulosic biofuels as well as biodiesel and renewable diesel. The deal, which is expected to be signed by President Barack Obama, extends by one year the cellulosic producer tax credit and expands it to algae-based fuel. The cellulosic bonus depreciation, which allows biofuel companies to expense up to half of their eligible capital costs in their first year, was also given a one-year extension.