§ 1.28-0. Credit for clinical testing expenses for certain drugs for rare diseases or conditions; table of contents.

(a) General rule.

(b) Qualified clinical testing expenses.

(1) In general.

(2) Modification of section 41(b).

(3) Exclusion for amounts funded by another person.

(i) In general.

(ii) Clinical testing in which taxpayer retains no rights.

(iii) Clinical testing in which taxpayer retains substantial rights.

(A) In general.

(B) Drug by drug determination.

(iv) Funding for qualified clinical testing expenses determinable only in subsequent taxable years.

(4) Special rule governing the application of section 41(b) beyond its expiration date.

(c) Clinical testing.

(1) In general.

(2) Definition of “human clinical testing”.

(3) Definition of “carried out under” section 505(i).

(d) Definition and special rules.

(1) Definition of “rare disease or condition”.

(i) In general.

(ii) Cost of developing and making available the designated drug.

(A) In general.

(B) Exclusion of costs funded by another person.

(C) Computation of cost.

(D) Allocation of common costs. Costs for developing and making available the designated drug for both the disease or condition for which it is designated and one or more other diseases or conditions.

(iii) Recovery from sales.

(iv) Recordkeeping requirements.

(2) Tax liability limitation.

(i) Taxable years beginning after December 31, 1986.

(ii) Taxable years beginning before January 1, 1987, and after December 31, 1983.

(iii) Taxable years beginning before January 1, 1984.

(3) Special limitations on foreign testing.

(i) Clinical testing conducted outside the United States—In general.

(ii) Insufficient testing population in the United States.

(A) In general.

(B) “Insufficient testing population”.

(C) “Unrelated to the taxpayer”.

(4) Special limitations for certain corporations.

(i) Corporations to which section 936 applies.

(ii) Corporations to which section 934(b) applies.

(5) Aggregation of expenditures.

(i) Controlled group of corporations: organizations under common control.

(A) In general.

(B) Definition of controlled group of corporations.

(C) Definition of organization.

(D) Determination of common control.

(ii) Tax accounting periods used.

(A) In general.

(B) Special rule where the timing of clinical testing is manipulated.

(iii) Membership during taxable year in more than one group.

(iv) Intra-group transactions.

(A) In general.

(B) In-house research expenses.

(C) Contract research expenses.

(D) Lease payments.

(E) Payments for supplies.

(6) Allocations.

(i) Pass-through in the case of an S corporation

(ii) Pass-through in the case of an estate or a trust.

(iii) Pass-through in the case of a partnership.

(A) In general.

(B) Certain partnership non-business expenditures.

(C) Apportionment.

(iv) Year in which taken into account.

(v) Credit allowed subject to limitation.

(7) Manner of making an election.