O

Orphan Drug Credit

Form 8820

 Attach to your tax return. 

Department of the Treasury

Internal Revenue Service

Name(s) shown on return Identifyi

Current Year Credit

1 1

2 2

3

4

3

4

Part I

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

● Individuals. Enter the amount from Form 1040, line 43

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)

Credit for fuel from a nonconventional source

Qualified electric vehicle credit (Form 8834, line 20)

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 54; 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 testin

Generally, qualified clinic

expenses are amounts p

the taxpayer that would 

qualified research expen

41, with two modificatio

● In sections 41(b)(2) an

testing” is substituted fo

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 47 through 53
Form 8820 (2004) 

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

a credit that was allocated to you from an

S corporation, a partnership, an estate, or

a trust.

Who must file Form 38

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 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 

general business credit (

from Form 8844, Form 8

Clinical testing. Generally, clinical testing of Form 8835), or

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 co

this form will vary depen

circumstances. The estim

is:

Recordkeeping 

Preparing and sending

the form to the IRS 

If you have comments 

accuracy of these time e

suggestions for making t

we would be happy to h

the instructions for the ta

which this form is filed.

Paperwork Reduction A

ask for the information o

carry out the Internal Re

United States. You are r

the information. We need 

you are complying with t

allow us to figure and co

amount of tax.

You are not required t

information requested on 

subject to the Paperwor

unless the form displays 

control number. Books o

to a form or its instructio

retained as long as their 

become material in the a

any Internal Revenue law

returns and return inform

confidential, as required 

Learning about the

law or the form 

● An orphan drug credit 

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 ow

minimum tax (AMT), you 

still compute the tentativ

(TMT) to figure your cred

corporation exempt from 

section 55(e), enter zero

complete and attach the 

form or schedule.

See section 38(c)(5) for s

apply to married couples 

returns, controlled corpo

regulated investment co

estate investment trusts, 

trusts.

If you cannot use all of t

of the tax liability limit (li

than line 4), carry the un

year, then forward up to 

instructions for Form 380

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 carryfo

those credits.

See the instructions fo

list of credits included in 

business credit.

Part I

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.

Current Year Credit

Allowable Credit