Form 8820

(Rev. September 2018)

Department of the Treasury 

Internal Revenue Service 

Orphan Drug Credit

▶ Go to www.irs.gov/Form8820 for the latest information.

▶ Attach to your tax return.

OMB No. 1545-1505

Attachment 

Sequence No. 103

Name(s) shown on return Identifying number

Part I Current Year Credit

1 Qualified clinical testing expenses paid or incurred during the tax year (see instructions) . . . . 1 

2a Are you electing the reduced credit under section 280C? ▶ Yes No

If “Yes,” multiply line 1 by 19.75% (0.1975). If “No,” multiply line 1 by 25% (0.25) and see the

instructions for the statement that must be attached. Members of controlled groups or businesses

under common control, see instructions for the statement that must be attached . . . . . . 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 Subtract line 2b from line 2a. If zero or less, enter -0- . . . . . . . . . . . . . . . 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 Form 3800, Part III, line 1h . . . . . 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 Form 3800, Part III, line 1h . 6 

For Paperwork Reduction Act Notice, see instructions. Cat. No. 11208S Form 8820 (Rev. 9-2018)
Form 8820 (Rev. 9-2018) Page 2

Part II Orphan Drug Information (see instructions)

(a) (b) 

Name of orphan drug

(c) 

Designation application number

(d) 

Date drug designated 

(mm/dd/yyyy)

7a

b

c

d

e

f

g

h

i

j

k

l

m

n

o

p

q

r

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x

y

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Form 8820 (Rev. 9-2018)
Form 8820 (Rev. 9-2018) Page 3

General Instructions

Section references are to the Internal 

Revenue Code unless otherwise 

noted.

Future developments. For the latest 

information about developments 

related to Form 8820 and its 

instructions, such as legislation 

enacted after this form and 

instructions were published, go to 

www.irs.gov/Form8820.

What’s New. For tax years 

beginning after 2017, the credit rate 

for the orphan drug credit has been 

reduced to 25% and there is an 

election for a reduced credit.

Purpose of Form

Use Form 8820 to figure and claim 

the orphan drug credit and to elect 

the reduced credit under section 

280C. The credit is 25% 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 

pass-through entities, are not 

required to complete or file this form. 

Instead, they can report this credit 

directly on Form 3800.

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.”

• 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. 

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.

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.

Testing Not Eligible for the 

Credit

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.

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, your 

credit is determined on a 

proportionate basis to your share of 

the aggregate clinical testing 

expenses taken into account by the 

group for the 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.

For purposes of the reduced credit 

election, a member of a controlled 

group or a trade or business which is 

treated as being under common 

control with other trades or 

businesses may make the election 

under section 280C(b)(3). However, 

only the common parent (within the 

meaning of Regulations section 

1.1502-77(a)(1)) of a consolidated 

group may make the election on 

behalf of the members of a 

consolidated group.

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

If you are electing the reduced 

orphan drug credit, you must 

complete Form 8820 (even if no 

orphan drug credits are claimed on 

the original return) and clearly 

indicate your intent to make the 

election. In order for the election to 

apply, the Form 8820 must be filed 

with your original timely filed 

(including extensions) return for the 

tax year. Once made, the election is 
Form 8820 (Rev. 9-2018) Page 4

irrevocable for that tax year. 

If you do not elect the reduced 

credit, you must reduce your 

otherwise allowable deduction for 

qualified clinical testing expenses by 

the amount of the credit on this line. 

In a case in which qualified clinical 

testing expenses are capitalized, 

if the credit exceeds the amount 

allowed as a deduction for the tax 

year, reduce the amount chargeable 

to capital account for the year for 

such expenses by the amount of the 

excess. Attach a statement to your 

tax return that lists the deduction 

amounts (or capitalized expenses) 

that were reduced. Identify the lines 

of your return (schedule or forms for 

capitalized items) on which the 

reductions were made.

Line 2b

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 

(for example, line 2 of Form 8932) 

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.

Line 5 

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.

If the estate or trust is subject to 

the passive activity rules, include on 

line 3 any orphan drug credit from 

passive activities disallowed for prior 

years and carried forward to this 

year. Complete Form 8582-CR, 

Passive Activity Credit Limitations, 

to determine the allowed credit that 

must be allocated between the 

estate or trust and the beneficiaries. 

For details, see the Instructions for 

Form 8582-CR.

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 and 

business taxpayers filing this form is 

approved under OMB control 

number 1545-0074 and 1545-0123 

and is included in the estimates 

shown in the instructions for their 

individual and business income tax 

return. The estimated burden for all 

other taxpayers who file this form is 

shown below.

Recordkeeping . . 2 hr., 37 min.

Learning about the 

law or the form . . 1 hr., 00 min.

Preparing and sending 

the form to the IRS . 1 hr., 04 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.