Fillable Form 8820 - Orphan Drug Credit - Internal Revenue Service (Page 3 of 4) in pdf

Form 8820 (Rev. 9-2017)

Page

General Instructions

Member of Controlled Group

2. The testing occurs after the

date the drug is designated under

or Business Under Common

Section references are to the Internal

Act section 526 and before the date

Control

Revenue Code unless otherwise

on which an application for the drug

noted.

For purposes of figuring the credit,

is approved under Act section 505(b)

Future developments. For the latest

all members of a controlled group of

(or, if the drug is a biological

information about developments

corporations (as defined in section

product, before the date the drug is

related to Form 8820 and its

41(f)(1)(A) and (f)(5)) and all members

licensed under section 351 of the

instructions, such as legislation

of a group of businesses under

Public Health Service Act).

enacted after this form and

common control (as defined in

3. The testing is conducted by or

instructions were published, go to

section 41(f)(1)(B)), are treated as a

for the taxpayer to whom the

single taxpayer. As a member, your

designation under Act section 526

credit is determined on a

Purpose of Form

applies.

proportionate basis to your share of

4. The testing relates to the use of

Use Form 8820 to claim the orphan

the aggregate clinical testing

the drug for the rare disease or

drug credit. The credit is 50% of

expenses taken into account by the

condition for which it was

qualified clinical testing expenses

group for the orphan drug credit.

designated under Act section 526.

paid or incurred during the tax year.

Enter your share of the credit on line

See section 45C and Regulations

Rare disease or condition. A rare

2a. Attach a statement showing how

section 1.28-1 for details.

disease or condition is one which

your share of the credit was figured,

afflicts:

Taxpayers that are not

and write “See Attached” next to the

partnerships, S corporations,

• 200,000 or fewer persons in the

entry space for line 2a.

estates, or trusts, and whose only

United States or

Specific Instructions

source of this credit is from those

• More than 200,000 persons in the

pass-through entities, are not

Figure any orphan drug credit from

United States, but for which there is

required to complete or file this form.

your own trade or business on lines

no reasonable expectation of

Instead, they can report this credit

1 and 2a.

recovering the cost of developing

directly on Form 3800.

and making available a drug in the

Line 1

Definitions

United States for the disease from

Complete Part II for each orphan

sales of the drug in the United

Qualified clinical testing expenses.

drug for which qualified clinical

States.

Generally, qualified clinical testing

testing expenses are paid or

The above determinations are

incurred during the tax year and

expenses are amounts paid or

made as of the date the drug is

incurred by the taxpayer that would

included in line 1.

designated under Act section 526.

be described as qualified research

Line 2a

expenses under section 41, with two

Testing Not Eligible for the

Reduce the deduction for qualified

modifications:

Credit

clinical testing expenses otherwise

• In sections 41(b)(2) and (3), “clinical

allowable on your income tax return

The credit is not allowed for clinical

testing” is substituted for “qualified

by the amount of the credit shown

testing conducted outside the

research” and

on line 2a. If the credit exceeds the

United States unless there is an

• 100% (instead of 65% or 75%) of

amount allowed as a deduction for

insufficient U.S. testing population

contract research expenses are

the tax year, reduce the amount

and the testing is conducted by a

treated as clinical testing expenses.

chargeable to the capital account for

U.S. person or by another person

the year for such expenses by the

Qualified clinical testing expenses

not related to the taxpayer. Testing

amount of the excess. See section

do not include expenses to the

conducted either inside or outside

280C(b) for special rules.

extent they are funded by a grant,

the United States by a corporation to

contract, or otherwise by a

which section 936 applies is not

Line 2b

governmental entity or another

eligible for the orphan drug credit.

If the credit on line 2a includes

person.

wages paid to employees, and you

Coordination With the

Clinical testing. Generally, clinical

are also claiming a credit for

Research Credit

testing means any human clinical

employer differential wage payments

Qualified clinical testing expenses

testing that meets all four of the

based on wages paid to the same

used to figure the orphan drug credit

following conditions.

employees, enter on line 2b the

cannot also be used to figure the

1. The testing is carried out under

portion of the credit from the

credit for increasing research

an exemption for a drug being tested

employer differential wage credit line

activities. However, any of these

for a rare disease or condition under

(for example, line 2 of Form 8932)

expenses that are also qualified

section 505(i) of the Federal Food,

that is attributable to wages that

research expenses must be included

Drug, and Cosmetic Act (Act).

were also used to figure the credit

in base period research expenses

on line 2a.

when figuring the credit for

See Form 8932, Credit for

increasing research activities in a

Employer Differential Wage

later tax year.

Payments, for information on the

credit.

Form 8820 - Orphan Drug Credit - Internal Revenue Service Page 3

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