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Official form guide
Form 8820: Orphan Drug Credit
IRS Form 8820 is the Orphan Drug Credit form used by partnerships, S corporations, estates, trusts, and other taxpayers to calculate and claim the credit for qualified clinical testing expenses. The credit rate is 25% (or 19.75% if the reduced credit election is made).
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IRS Form 8820 - Orphan Drug Credit
IRS Form 8820 is the Orphan Drug Credit form used by partnerships, S corporations, estates, trusts, and other taxpayers to calculate and claim the credit for qualified clinical testing expenses. The credit rate is 25% (or 19.75% if the reduced credit election is made).
Risk Radar
Scan points- 1Failing to file Form 8820 when electing the reduced credit voids the election.
- 2Electing the reduced credit but not filing Form 8820 with the original return.
- 3Multiplying line 1 by the wrong percentage (using 25% instead of 19.75% for a reduced credit election).
- 4Omitting the required statement that explains how the share of the credit on line 2a was calculated.
- 5Leaving any orphan drug entry in Part II incomplete—missing generic name, designation number, or date.
Plain English
Form 8820 lets a business calculate the credit it gets for money spent on clinical testing of an orphan drug. It shows the total expenses, applies the 25% credit (or a lower rate if elected), and reports each drug’s name and designation details.
Submission Date
- Filing date: 2018-09-27 23:00:08
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when you are a partnership, S corporation, estate, trust, or other taxpayer needing to figure and claim the orphan drug credit or elect the reduced credit under section 280C.
- Do not use it when you are not a partnership, S corporation, estate, or trust and your only source of the credit is from those pass‑through entities.
- Check Form 3800 instead when you can report the orphan drug credit directly on the general business credit form.
Form selector
Use this form or another form?
Taxpayer is not a partnership, S corporation, estate, or trust and only receives credit through pass‑through entities
Orphan drug credit can be reported directly on the general business credit form
✓ Confirm no pass‑through credit remains
Credit includes wages also used for employer differential wage credit
Coordination between Form 8820 line 2a and Form 8932 is required
✓ Verify overlapping wage amounts
Individual taxpayer wants to claim orphan drug credit directly
Direct reporting avoids filing Form 8820
✓ Ensure you are not a partnership, S corporation, estate, or trust
Deadline or filing window
Not stated in the official source.
Checklist
What you need before filling it out
Line 1 – Qualified clinical testing expenses
Invoices, contracts showing expenses · Form 8820 Part I
Line 2a – Orphan drug credit amount
Calculation worksheet · Form 8820 line 2a
Election question – Reduced credit under section 280C?
Election statement attached · Form 8820 line a
Line 2b – Overlap with employer differential wage credit
Form 8932 credit amount · Form 8820 line 2b
Statement of share for controlled group
Controlled group statement · Attachment to Form 8820
Before you submit
- 1Verify the revision date on the form reads September 2018.
- 2Confirm the name and identifying number match the tax return.
- 3Calculate qualified clinical testing expenses and ensure they are eligible.
- 4Multiply line 1 by the correct credit rate (25% or 19.75%) based on election.
- 5Indicate election for reduced credit on line a and attach the required statement if “Yes”.
- 6Attach the statement showing how the credit was figured and label it “See Attached”.
- 7If applicable, complete line 2b with the portion attributable to Form 8932.
- 8Ensure any required controlled‑group statement is attached.
- 9Review that no ineligible testing (outside U.S. without exception) is included.
- 10Sign the form if a signature line is present.
How to file this form
- 1Gather all qualified clinical testing expense documentation.
- 2Complete Part I of Form 8820, calculating line 1 and line 2a.
- 3Attach the credit calculation statement labeled “See Attached”.
- 4If electing reduced credit, check “Yes” on line a and attach the required election statement.
- 5File Form 8820 with the applicable tax return (e.g., Form 1120, 1120‑S, or 1041).
- 6Retain a copy of the completed Form 8820 and attachments for records.
- 7Submit the return and keep the IRS acknowledgment as proof of filing.
Known limitations
- 1Non‑partnership, non‑S corporation, non‑estate, and non‑trust taxpayers whose only orphan‑drug credit comes from those pass‑through entities are not required to file Form 8820 (Form p.3).
- 2Members of controlled groups or businesses under common control must attach a statement as required by the instructions (Form p.1).
- 3If the reduced credit election is not made, the credit amount must reduce the otherwise allowable deduction for qualified clinical testing expenses (Form p.4).
Field map
Compact field-by-field guide
Entity Info
1 items
Name and taxpayer ID of the entity claiming the credit.
Credit Info
1 items
Type of credit or incentive being claimed.
Calculation
2 items
The base amount used to calculate the credit.
Calculated credit amount after applying formulas and limitations.
Certification
1 items
Detailed breakdown supporting the credit calculation.
Signatures
1 items
Sign and date the form.
Almost done reviewing the fields?
Fillable formOpen in Editor->The form shows Rev. September 2018 and directs users to www.irs.gov/Form8820 for the latest information; the credit rate was reduced to 25% for tax years beginning after 2017, with an optional reduced credit election.
What changed or needs a fresh check
- Edition date — confirm the revision reads September 2018
- Fee — Not stated in the official source
- Mailing address — Not stated in the official source
- Signature — Not stated in the official source
Quick Facts
Downloads
After you file
- 1Attach Form 8820 to the tax return before filing (Form p.1).
- 2Retain all books, records, and the attached statement for as long as they may become material in the administration of any Internal Revenue law (Form p.4).
- 3Report the calculated orphan drug credit on Form 3800, Part III, line 1h for most filers (Form p.1).
- 4Partnerships and S corporations must also report the credit amount on Schedule K (Form p.1).
- 5If the credit exceeds the allowable deduction, reduce the capitalized expense amount by the excess as instructed (Form p.4).
Sources
- SRCForm p.1 — purpose: Use Form 8820 to figure and claim the orphan drug credit and to elect the reduced credit under section 280C.
- SRCForm p.1 — credit rate: Multiply line 1 by 25% if “No” to reduced credit election, or by 19.75% if “Yes.”
- SRCForm p.1 — attachment: Form 8820 must be attached to your tax return.
- SRCForm p.1 — controlled groups: Members of controlled groups or businesses under common control must attach a statement.
- SRCForm p.3 — limitation: Taxpayers not partnerships, S corporations, estates, or trusts, whose only credit source is those entities, are not required to file Form 8820; they may report on Form 3800.
- SRCForm p.1 — partnership reporting: Partnerships and S corporations report the credit amount on Schedule K.
- SRCForm p.1 — estate/trust reporting: Estates and trusts report the credit on Form 3800, Part III, line 1h.
- SRCForm p.1 — Form 8932 reference: Enter the portion of the credit from Form 8932, line 2, attributable to wages on line 2a.
- SRCForm p.4 — recordkeeping: Retain books and records as long as they may become material in the administration of any Internal Revenue law.
- SRCForm p.4 — capitalized expenses: If credit exceeds the allowable deduction, reduce the capital account for the year by the excess amount.
Common confusion points
Do I need to file Form 8820 if I’m a corporation?
The form is primarily for partnerships, S corporations, estates, and trusts, and other taxpayers may report directly on Form 3800.
→ Verify your entity type and check the limitation for non‑pass‑through entities (Form p.3).
What credit rate should I use – 25% or 19.75%?
There is an election for a reduced credit under section 280C.
→ Look at line a; answer “Yes” to use 19.75% and “No” to use 25% (Form p.1).
Do I have to attach a statement if my business is in a controlled group?
Instructions require a statement for members of controlled groups or businesses under common control.
→ Confirm group status and attach the required statement (Form p.1).
Where do I report the credit if I’m a partnership?
Partnerships must report the amount on Schedule K and also on Form 3800.
→ Follow the line 4 instructions for partnerships and S corporations (Form p.1).
Can I include expenses that were funded by a grant?
Qualified clinical testing expenses exclude amounts funded by a grant, contract, or other person.
→ Exclude any grant‑funded amounts before calculating line 1 (Form p.3).
What if my qualified clinical testing expenses were capitalized?
Capitalized expenses require a reduction of the capital account if the credit exceeds the allowable deduction.
→ Reduce the capitalized amount by the excess credit as described (Form p.4).
Do I need to file Form 8820 if the only credit I receive is from a pass‑through entity?
Taxpayers not in the listed categories whose only source is a pass‑through are not required to file.
→ Use Form 3800 directly instead of Form 8820 (Form p.3).
How long must I keep the records for Form 8820?
Records must be retained as long as they may become material in tax administration.
→ Keep books and the attached statement for the required period (Form p.4).
Workflow map
Related forms and next steps
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Questions about IRS Form 8820
What is IRS Form 8820 used for?
Form 8820 lets a business calculate the credit it gets for money spent on clinical testing of an orphan drug. It shows the total expenses, applies the 25% credit (or a lower rate if elected), and reports each drug’s name and designation details.
Who must file IRS Form 8820?
Partnerships, S corporations, estates, trusts, and any other taxpayer claiming the orphan drug credit – including those electing the reduced credit under section 280C – must file IRS Form 8820.
What information does IRS Form 8820 require?
Part I reports the qualified clinical testing expenses, the credit amount, and any reduced‑credit election; Part II lists each orphan drug’s generic name, designation application number, and designation date, plus allocation details for estates or trusts.
How do I complete IRS Form 8820?
Enter the qualified clinical testing expenses on line 1 of Part I. Indicate a reduced‑credit election on line 2a, multiply line 1 by the appropriate rate, and attach a statement showing the calculation. Complete Part II for every orphan drug, providing its name, designation number, and designation date, and attach additional Part II pages as needed. File the completed form with the original timely‑filed tax return.
Do I need to file Form 8820 if I’m a corporation?
The form is primarily for partnerships, S corporations, estates, and trusts, and other taxpayers may report directly on Form 3800. Verify your entity type and check the limitation for non‑pass‑through entities (Form p.3).
What credit rate should I use – 25% or 19.75%?
There is an election for a reduced credit under section 280C. Look at line a; answer “Yes” to use 19.75% and “No” to use 25% (Form p.1).
Do I have to attach a statement if my business is in a controlled group?
Instructions require a statement for members of controlled groups or businesses under common control. Confirm group status and attach the required statement (Form p.1).
Where do I report the credit if I’m a partnership?
Partnerships must report the amount on Schedule K and also on Form 3800. Follow the line 4 instructions for partnerships and S corporations (Form p.1).
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