Form 8820 Orphan Drug Credit

8820

Form
(Rev. December 2011)
Department of the Treasury
Internal Revenue Service
Name(s) shown on return

Part I

Orphan Drug Credit
▶

OMB No. 1545-1505
Attachment
Sequence No. 103

Attach to your tax return.

Identifying number

Current Year Credit

1

Qualified clinical testing expenses paid or incurred during the tax year (see instructions) .

.

.

.

1

2a

Current year credit. Multiply line 1 by 50% (.50) (see instructions)

.

.

.

2a

b Enter the portion of the credit from Form 8932, line 2, that is attributable to wages that were also
used to figure the credit on line 2a above . . . . . . . . . . . . . . . . . . .

2b

c

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

2c

3

Orphan drug credit from partnerships, S corporations, estates, or trusts .

.

.

.

.

.

.

.

.

3

4

Add lines 2c and 3. Estates and trusts go to line 5. Partnerships and S corporations, report this
amount on Schedule K. All others, report this amount on the applicable line of Form 3800 (e.g.,
line 1h of the 2011 Form 3800) . . . . . . . . . . . . . . . . . . . . . . .

4

5

Amount allocated to the beneficiaries of the estate or trust (see instructions) .

.

5

6

Estates and trusts. Subtract line 5 from line 4. Report this amount on the applicable line of Form
3800 (e.g., line 1h of the 2011 Form 3800) . . . . . . . . . . . . . . . . . . .

6

Subtract line 2b from 2a. If zero or less, enter -0- .

For Paperwork Reduction Act Notice, see instructions.

.

.

.

.

.

.

.

.

Cat. No. 11208S

.

.

.

.

.

Form 8820 (Rev. 12-2011)

Page 2

Form 8820 (Rev. 12-2011)

Part II
(a)

Orphan Drug Information (see instructions)
(b)
Name of orphan drug

(c)
Designation application number

(d)
Date drug designated
(yyyymmdd)

7A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
Form 8820 (Rev. 12-2011)

Page 3

Form 8820 (Rev. 12-2011)

General Instructions

Line 2b

• A new Part II was added to the form for
orphan drug information.
• The IRS has created a page on IRS.gov for
information about Form 8820 at
www.irs.gov/form8820. Information about any
future developments affecting Form 8820
(such as legislation enacted after we release
it) will be posted on that page.

Rare disease or condition. A rare disease or
condition is one which afflicts:
• 200,000 or fewer persons in the United
States or
• More than 200,000 persons in the United
States, but for which there is no reasonable
expectation of recovering the cost of
developing and making available a drug in the
United States for the disease from sales of the
drug in the United States.
The above determinations are made as of
the date the drug is designated under Act
section 526.

Purpose of Form

Testing Not Eligible for the Credit

Line 5

Use Form 8820 to claim the orphan drug
credit. The credit is 50% of qualified clinical
testing expenses paid or incurred during the
tax year. See section 45C and Regulations
section 1.28-1 for details.
Taxpayers that are not partnerships, S
corporations, estates, or trusts, and whose
only source of this credit is from those passthrough entities, are not required to complete
or file this form. Instead, they can report this
credit directly on Form 3800.

The credit is not allowed for clinical testing
conducted outside the United States unless
there is an insufficient U.S. testing population
and the testing is conducted by a U.S. person
or by another person not related to the
taxpayer. Testing conducted either inside or
outside the United States by a corporation to
which section 936 applies is not eligible for
the orphan drug credit.

Section references are to the Internal Revenue
Code unless otherwise noted.

What’s New

Definitions
Qualified clinical testing expenses.
Generally, qualified clinical testing expenses
are amounts paid or incurred by the taxpayer
that would be described as qualified research
expenses under section 41, with two
modifications:
• In sections 41(b)(2) and (3), “clinical testing”
is substituted for “qualified research” and
• 100% (instead of 65% or 75%) of contract
research expenses are treated as clinical
testing expenses.
Qualified clinical testing expenses do not
include expenses to the extent they are
funded by a grant, contract, or otherwise by a
governmental entity or another person. In
addition, qualified clinical testing expenses do
not include any expenses taken into account
in figuring the amount of the allowable
qualifying therapeutic discovery project grant
or credit. For more details, see section 48D(e)
(2)(C) and Notice 2010-45, 2010-23 I.R.B. 734.
Clinical testing. Generally, clinical testing
means any human clinical testing that meets
all four of the following conditions.
1. The testing is carried out under an
exemption for a drug being tested for a rare
disease or condition under section 505(i) of
the Federal Food, Drug, and Cosmetic Act
(Act).
2. The testing occurs after the date the drug
is designated under Act section 526 and
before the date on which an application for
the drug is approved under Act section 505(b)
(or, if the drug is a biological product, before
the date the drug is licensed under section
351 of the Public Health Service Act).
3. The testing is conducted by or for the
taxpayer to whom the designation under Act
section 526 applies.
4. The testing relates to the use of the drug
for the rare disease or condition for which it
was designated under Act section 526.

Coordination With the Research
Credit
Qualified clinical testing expenses used to
figure the orphan drug credit cannot also be
used to figure the credit for increasing
research activities. However, any of these
expenses that are also qualified research
expenses must be included in base period
research expenses when figuring the credit
for increasing research activities in a later tax
year.

Member of Controlled Group or
Business Under Common Control
For purposes of figuring the credit, all
members of a controlled group of
corporations (as defined in section 41(f)(1)(A)
and (f)(5)) and all members of a group of
businesses under common control (as defined
in section 41(f)(1)(B)), are treated as a single
taxpayer. As a member, compute your credit
based on your proportionate share of qualified
clinical testing expenses giving rise to the
group’s orphan drug credit. Enter your share
of the credit on line 2a. Attach a statement
showing how your share of the credit was
figured, and write “See Attached” next to the
entry space for line 2a.

Specific Instructions
Figure any orphan drug credit from your own
trade or business on lines 1 and 2a.

Line 1
Complete Part II for each orphan drug for
which qualified clinical testing expenses are
paid or incurred during the tax year and
included in line 1.

Line 2a
Reduce the deduction for qualified clinical
testing expenses otherwise allowable on your
income tax return by the amount of the credit
shown on line 2a. If the credit exceeds the
amount allowed as a deduction for the tax
year, reduce the amount chargeable to the
capital account for the year for such expenses
by the amount of the excess. See section
280C(b) for special rules.

If the credit on line 2a includes wages paid to
employees, and you are also claiming a credit
for employer differential wage payments
based on wages paid to the same employees,
enter on line 2b the portion of the credit from
the employer differential wage credit line
(e.g., line 2 of Form 8932 (Rev. December
2010)) that is attributable to wages that were
also used to figure the credit on line 2a.
See Form 8932, Credit for Employer
Differential Wage Payments, for information
on the credit.
Allocate the orphan drug credit on line 4
between the estate or trust and the
beneficiaries in the same proportion as
income was allocated and enter the
beneficiaries’ share on line 5.

Part II
For each drug for which qualified clinical
testing expenses are included on line 1; enter
the generic name of the orphan drug, the
Designation application number, and the date
the drug was designated under section 526 of
the Federal Food, Drug, and Cosmetic Act.
Attach as many Part II pages as needed to
show all orphan drugs.
Paperwork Reduction Act Notice. We ask
for the information on this form to carry out
the Internal Revenue laws of the United
States. You are required to give us the
information. We need it to ensure that you are
complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB control
number. Books or records relating to a form
or its instructions must be retained as long as
their contents may become material in the
administration of any Internal Revenue law.
Generally, tax returns and return information
are confidential, as required by section 6103.
The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated burden for
individual taxpayers filing this form is
approved under OMB control number
1545-0074 and is included in the estimates
shown in the instructions for their individual
income tax return. The estimated burden for
all other taxpayers who file this form is shown
below.
Recordkeeping . . . . 1 hr., 54 min.
Learning about the
law or the form . . . . . . . 1 hr.
Preparing and sending
the form to the IRS . . . . 1 hr., 4 min.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler, we
would be happy to hear from you. See the
instructions for the tax return with which this
form is filed.