8820 Orphan Drug Credit OMB No. 1545-1505 Form

© Attach to your tax return. Attachment

Sequence No. 103 Department of the TreasuryInternal Revenue Service

Name(s) shown on return Identifying number

1 1

2a 2a

3

4

3

4

Cat. No. 11208S Form 8820 (Rev. 12-2008)

Qualified clinical testing expenses paid or incurred during the tax year

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

Orphan drug credit from partnerships, S corporations, estates, or trusts

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 2008 Form 3800)

General Instructions

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.

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 back of form.

(Rev. December 2008)

5 Amount allocated to the beneficiaries of the estate or trust (see instructions)

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)

5

6

What’s New

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

Qualified clinical testing expenses do section 526.

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.

2b

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 

c Subtract line 2b from 2a. If zero or less, enter -0- 2c

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.

The current year credit may have to be

reduced by the amount (if any) of the

credit for employer differential wage

payments. See the instructions for line

2b for details.

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.
Form 8820 (Rev. 12-2008) Page 2

Line 2a

Line 5 

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.

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.

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.

Specific Instructions

Figure any orphan drug credit from your

own trade or business on lines 1 and 2a.

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.

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.

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.

Preparing and sending

the form to the IRS 1 hr., 4 min.

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.

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.

The above determinations are made

as of the date the drug is designated

under Act section 526.

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) 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. Learning about the

law or the form 1 hr.