Form 8820

(Rev. December 2011)

Department of the Treasury 

Internal Revenue Service 

Orphan Drug Credit

▶ 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 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 Subtract line 2b from 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 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 

For Paperwork Reduction Act Notice, see instructions. Cat. No. 11208S Form 8820 (Rev. 12-2011)
Form 8820 (Rev. 12-2011) Page 2

Part II Orphan Drug Information (see instructions)

(a) (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)
Form 8820 (Rev. 12-2011) Page 3

General Instructions

Section references are to the Internal Revenue 

Code unless otherwise noted.

What’s New

• 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.

Purpose of Form

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.

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.

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, 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.

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 

(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.

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.

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.