Form 8820 Orphan Drug Credit

1. 8820 Orphan Drug Credit OMB No. 1545-1505
Form
(Rev. December 2008)
Attachment
Department of the Treasury Attach to your tax return. 103
Sequence No.
Internal Revenue Service
Name(s) shown on return Identifying number
1
1 Qualified clinical testing expenses paid or incurred during the tax year
2a
2a Current year credit. Multiply line 1 by 50% (.50) (see instructions)
b Enter the portion of the credit from Form 8932, line 2, that is attributable to wages that were also
2b
used to figure the credit on line 2a above
2c
c Subtract line 2b from 2a. If zero or less, enter -0-
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.,
4
line 1h of the 2008 Form 3800)
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 2008 Form 3800) 6
General Instructions Definitions 2. The testing occurs after the date
the drug is designated under Act section
Section references are to the Internal Qualified clinical testing expenses. 526 and before the date on which an
Revenue Code unless otherwise noted. Generally, qualified clinical testing application for the drug is approved
expenses are amounts paid or incurred under Act section 505(b) (or, if the drug
What’s New by the taxpayer that would be described is a biological product, before the date
as qualified research expenses under the drug is licensed under section 351 of
The current year credit may have to be section 41, with two modifications: the Public Health Service Act).
reduced by the amount (if any) of the
● In sections 41(b)(2) and (3), “clinical 3. The testing is conducted by or for
credit for employer differential wage
testing” is substituted for “qualified the taxpayer to whom the designation
payments. See the instructions for line
research” and under Act section 526 applies.
2b for details.
● 100% (instead of 65% or 75%) of 4. The testing relates to the use of the
Purpose of Form contract research expenses are treated drug for the rare disease or condition for
as clinical testing expenses. which it was designated under Act
Use Form 8820 to claim the orphan drug
section 526.
Qualified clinical testing expenses do
credit. The credit is 50% of qualified
not include expenses to the extent they
clinical testing expenses paid or incurred Rare disease or condition. A rare
are funded by a grant, contract, or
during the tax year. See section 45C and disease or condition is one which
otherwise by a governmental entity or
Regulations section 1.28-1 for details. afflicts:
another person.
● 200,000 or fewer persons in the
Taxpayers that are not partnerships,
Clinical testing. Generally, clinical
S corporations, estates, or trusts, and United States or
testing means any human clinical testing
whose only source of this credit is from
● More than 200,000 persons in the
that meets all four of the following
those pass-through entities, are not
United States, but for which there is no
conditions.
required to complete or file this form.
reasonable expectation of recovering the
Instead, they can report this credit 1. The testing is carried out under an cost of developing and making available
directly on Form 3800. exemption for a drug being tested for a a drug in the United States for the
rare disease or condition under section disease from sales of the drug in the
505(i) of the Federal Food, Drug, and United States.
Cosmetic Act (Act).
8820
For Paperwork Reduction Act Notice, see back of form. Cat. No. 11208S Form (Rev. 12-2008)

2. 2
Form 8820 (Rev. 12-2008) Page
Specific Instructions Paperwork Reduction Act Notice. We
The above determinations are made
ask for the information on this form to
as of the date the drug is designated
Figure any orphan drug credit from your carry out the Internal Revenue laws of the
under Act section 526.
own trade or business on lines 1 and 2a. United States. You are required to give
Testing Not Eligible for the us the information. We need it to ensure
Line 2a
Credit that you are complying with these laws
and to allow us to figure and collect the
Reduce the deduction for qualified
The credit is not allowed for clinical right amount of tax.
clinical testing expenses otherwise
testing conducted outside the United
allowable on your income tax return by You are not required to provide the
States unless there is an insufficient U.S.
the amount of the credit shown on line information requested on a form that is
testing population and the testing is
2a. If the credit exceeds the amount subject to the Paperwork Reduction Act
conducted by a U.S. person or by
allowed as a deduction for the tax year, unless the form displays a valid OMB
another person not related to the
reduce the amount chargeable to the control number. Books or records
taxpayer. Testing conducted either
capital account for the year for such relating to a form or its instructions must
inside or outside the United States by a
expenses by the amount of the excess. be retained as long as their contents may
corporation to which section 936 applies
See section 280C(b) for special rules. become material in the administration of
is not eligible for the orphan drug credit.
any Internal Revenue law. Generally, tax
Line 2b
Coordination With the returns and return information are
confidential, as required by section 6103.
Research Credit If the credit on line 2a includes wages
paid to employees, and you are also The time needed to complete and file
Qualified clinical testing expenses used claiming a credit for employer differential this form will vary depending on
to figure the orphan drug credit cannot wage payments based on wages paid to individual circumstances. The estimated
also be used to figure the credit for the same employees, enter on line 2b the burden for individual taxpayers filing this
increasing research activities. However, portion of the credit from the employer form is approved under OMB control
any of these expenses that are also differential wage credit line (e.g., line 2 of number 1545-0074 and is included in the
qualified research expenses must be Form 8932) that is attributable to wages estimates shown in the instructions for
included in base period research that were also used to figure the credit on their individual income tax return. The
expenses when figuring the credit for line 2a. estimated burden for all other taxpayers
increasing research activities in a later
who file this form is shown below.
tax year. See Form 8932, Credit for Employer
Differential Wage Payments, for Recordkeeping 1 hr., 54 min.
Member of Controlled Group information on the credit. Learning about the
or Business Under Common law or the form 1 hr.
Line 5
Control Preparing and sending
Allocate the orphan drug credit on line 4 the form to the IRS 1 hr., 4 min.
For purposes of figuring the credit, all between the estate or trust and the
If you have comments concerning the
members of a controlled group of beneficiaries in the same proportion as
accuracy of these time estimates or
corporations (as defined in section income was allocated and enter the
suggestions for making this form simpler,
41(f)(1)(A) and (f)(5)) and all members of a beneficiaries’ share on line 5.
we would be happy to hear from you.
group of businesses under common
See the instructions for the tax return
control (as defined in section 41(f)(1)(B)),
with which this form is filed.
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.