- 3 -
|
Form 8820 (Rev. 9-2017) Page 3
General Instructions 2. The testing occurs after the Member of Controlled Group
date the drug is designated under
Section references are to the Internal or Business Under Common
Act section 526 and before the date
Revenue Code unless otherwise Control
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 (or, if the drug is a biological all members of a controlled group of
information about developments product, before the date the drug is corporations (as defined in section
related to Form 8820 and its licensed under section 351 of the 41(f)(1)(A) and (f)(5)) and all members
instructions, such as legislation Public Health Service Act). of a group of businesses under
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
www.irs.gov/Form8820. single taxpayer. As a member, your
designation under Act section 526
Purpose of Form applies. credit is determined on a
proportionate basis to your share of
Use Form 8820 to claim the orphan 4. The testing relates to the use of the aggregate clinical testing
drug credit. The credit is 50% of the drug for the rare disease or expenses taken into account by the
qualified clinical testing expenses condition for which it was group for the orphan drug credit.
paid or incurred during the tax year. designated under Act section 526. 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,
Taxpayers that are not afflicts: 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
source of this credit is from those • More than 200,000 persons in the Specific Instructions
pass-through entities, are not United States, but for which there is Figure any orphan drug credit from
required to complete or file this form. no reasonable expectation of your own trade or business on lines
Instead, they can report this credit recovering the cost of developing 1 and 2a.
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
Qualified clinical testing expenses. sales of the drug in the United drug for which qualified clinical
Generally, qualified clinical testing States. testing expenses are paid or
expenses are amounts paid or The above determinations are incurred during the tax year and
incurred by the taxpayer that would made as of the date the drug is included in line 1.
be described as qualified research designated under Act section 526.
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 insufficient U.S. testing population amount allowed as a deduction for
contract research expenses are and the testing is conducted by a the tax year, reduce the amount
treated as clinical testing expenses. U.S. person or by another person chargeable to the capital account for
Qualified clinical testing expenses not related to the taxpayer. Testing the year for such expenses by the
do not include expenses to the conducted either inside or outside amount of the excess. See section
extent they are funded by a grant, the United States by a corporation to 280C(b) for special rules.
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
testing means any human clinical Research Credit
employer differential wage payments
testing that meets all four of the Qualified clinical testing expenses based on wages paid to the same
following conditions. used to figure the orphan drug credit employees, enter on line 2b the
1. The testing is carried out under cannot also be used to figure the portion of the credit from the
an exemption for a drug being tested credit for increasing research employer differential wage credit line
for a rare disease or condition under activities. However, any of these (for example, line 2 of Form 8932)
section 505(i) of the Federal Food, expenses that are also qualified that is attributable to wages that
Drug, and Cosmetic Act (Act). research expenses must be included 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.
|