OMB No. 1545-1505 8820 Orphan Drug Credit Form

 Attach to your tax return. Attachment

Sequence No. 103 Department of the Treasury

Internal Revenue Service

Name(s) shown on return Identifying number

Current Year Credit

1 1

2 2

3

4

3

4

Form 8820 (2005)

Part I

Allowable Credit (See Who must file Form 3800 to find out if you complete Part II or file Form 3800.)

● Individuals. Enter the amount from Form 1040, line 44

5

Corporations. Enter the amount from Form 1120, Schedule J, line 3; Form 1120-A,

Part I, line 1; or the applicable line of your return

●

●

8a 8a

b 8b

Foreign tax credit

Possessions tax credit (Form 5735, line 17 or 27)

Other specified credits (see instructions)

Nonconventional source fuel credit (Form 8907, line 23)

Add lines 8a through 8e 8f

9

9 Net income tax. Subtract line 8f from line 7. If zero, skip lines 10 through 13 and enter -0- on

line 14

6 Alternative minimum tax:

● Individuals. Enter the amount from Form 6251, line 35

● Corporations. Enter the amount from Form 4626, line 14 6

● Estates and trusts. Enter the amount from Form 1041, Schedule I, line 56

10

Tentative minimum tax (see instructions):

● Individuals. Enter the amount from Form 6251, line 33

10

● Corporations. Enter the amount from Form 4626, line 12

● Estates and trusts. Enter the amount from Form 1041,

Schedule I, line 54

11 Enter 25% (.25) of the excess, if any, of line 10 over $25,000 (see

instructions)

13

Subtract line 13 from line 9. If zero or less, enter -0-

13

14

Credit allowed for the current year. Enter the smaller of line 4 or line 14 here and on Form

1040, line 55; Form 1120, Schedule J, line 6d; Form 1120-A, Part I, line 2; Form 1041, Schedule

G, line 2c; or the applicable line of your return. If line 14 is smaller than line 4, see instructions 15

Part II



5 Regular tax before credits:

7 Add lines 5 and 6 7

12

Enter the greater of line 11 or line 12

11

12

Cat. No. 11208S

Qualified clinical testing expenses paid or incurred during the tax year

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

Pass-through orphan drug credits from an S corporation, partnership, estate, or trust

Current year credit. Add lines 2 and 3

General Instructions

Purpose of Form

Who Must File

An individual, estate, trust, organization, or

corporation that elects to claim an orphan

drug credit, or any S corporation,

partnership, estate, or trust that allocates

the credit to its shareholders, partners, or

beneficiaries must complete this form and

attach it to its income tax return.

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.

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

Section references are to the Internal

Revenue Code unless otherwise noted.

For Paperwork Reduction Act Notice, see page 2.

d

e

8d

Estates and trusts. Enter the sum of the amounts from Form 1041, Schedule G, lines 1a

and 1b, or the amount from the applicable line of your return

Net regular tax. Subtract line 8f from line 5. If zero or less, enter -0-

15

14



8e

f

c 8c

Credits from Form 1040, lines 48 through 54

2005
Form 8820 (2005) Page 2

a credit that was allocated to you from an

S corporation, a partnership, an estate, or

a trust.

Who must file Form 3800. You must file

Form 3800 if you have:

Line 2

Line 3

Line 4 

S corporations and partnerships.

Allocate the orphan drug credit on line 4

among the shareholders or partners.

Attach Form 8820 to Form 1120S or Form

1065 and on Schedule K-1 show the credit

for each shareholder or partner. Electing

large partnerships include this credit in

“general credits.”

● More than one credit included in the

general business credit (other than a credit

from Form 8844, Form 6478, or Section B

of Form 8835), or

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.

Line 1

Line 15

Line 11

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 5 hr., 30 min.

Preparing and sending

the form to the IRS 1 hr., 7 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.

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.

Learning about the

law or the form 1 hr.

● An orphan drug credit from a passive

activity,

Line 12

Members of a controlled group of

corporations or group of businesses

under common control. The group is

treated as a single taxpayer and the credit

allowed each member is based on its

proportionate share of the qualified clinical

testing expenses of the group. Enter on

line 1 your share of the group’s qualified

clinical testing expenses.

Reduce the deduction for qualified clinical

testing expenses otherwise allowable on

your income tax return by the amount of

the credit shown on line 2. 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.

Enter the amount of credit that was

allocated to you as a shareholder, partner,

or beneficiary.

Estates and trusts. Allocate the orphan

drug credit on line 4 between the estate or

trust and the beneficiaries in the same

proportion as income was allocated. On

the dotted line to the left of line 4, the

estate or trust should enter its share of the

credit. Label it “1041 Portion” and use this

amount in Part II (or on Form 3800, if

required) to figure the credit to take on

Form 1041. On Schedule K-1, show each

beneficiary’s share of the portion allocated

to beneficiaries.

Although you may not owe alternative

minimum tax (AMT), you generally must

still compute the tentative minimum tax

(TMT) to figure your credit. For a small

corporation exempt from the AMT under

section 55(e), enter zero. Otherwise,

complete and attach the applicable AMT

form or schedule.

See section 38(c)(5) for special rules that

apply to married couples filing separate

returns, controlled corporate groups,

regulated investment companies, real

estate investment trusts, and estates and

trusts.

If you cannot use all of the credit because

of the tax liability limit (line 14 is smaller

than line 4), carry the unused credit back 1

year, then forward up to 20 years. See the

instructions for Form 3800 for details.

Part II

The credit allowed for the current year may

be limited based on your tax liability. Use

Part II to figure the allowable credit unless

you must file Form 3800, General Business

Credit.

● A carryback or carryforward of any of

those credits.

See the instructions for Form 3800 for a

list of credits included in the general

business credit.

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.

● 100% (instead of 65% or 75%) of

contract research expenses are treated as

clinical testing expenses.

Allowable Credit

Specific Instructions

Figure any orphan drug credit from your

own trade or business on lines 1 and 2.

Skip lines 1 and 2 if you are claiming only

Part I

Current Year Credit

Line 8e 

Include on line 8e any amounts claimed on:

● Form 8834, Qualified Electric Vehicle

Credit, line 20,

● Form 8910, Alternative Motor Vehicle

Credit, line 18, and

● Form 8911, Alternative Fuel Vehicle

Refueling Property Credit, line 19.