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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →NIH announced a standard 15% indirect-cost rate in February 2025, but the announcement did not become the general reimbursement rule for NIH grants. On January 5, 2026, the First Circuit affirmed a judgment against the policy, holding that the attempted cap violated an appropriations rider and HHS regulations. NIH’s Grants Policy Statement, revised in March 2026, describes reimbursement based on applicable negotiated rates, alongside fixed-rate categories and other award-specific provisions.
What NIH announced in February 2025
On February 7, 2025, NIH issued NOT-OD-25-068, announcing a standard 15% indirect-cost rate for NIH grants in place of separately negotiated rates. The notice described the proposed rate as applying to new awards and to forward expenses on current awards. It was an announced policy, not a statement that the 15% rate had become NIH’s continuing general reimbursement rule.
NIH said the average indirect-cost rate it reported had averaged between 27% and 28% over time, with some organizations above 50% and, in some cases, above 60%. Those figures were NIH’s characterization in its 2025 notice; they are not a new calculation of every NIH award’s rate.
What the courts decided
On January 5, 2026, the U.S. Court of Appeals for the First Circuit affirmed the district court’s judgment in Commonwealth of Massachusetts v. National Institutes of Health. The court held that NIH’s attempt to impose the standard rate conflicted with a congressional appropriations rider and HHS regulations. In the court’s words: “We also hold that NIH’s attempt, through its Supplemental Guidance, to impose a 15% indirect cost reimbursement rate violates the congressionally enacted appropriations rider and HHS’s duly adopted regulations.”
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That ruling is the key legal outcome of the cap dispute. NIH’s Grants Policy Statement section on indirect-cost reimbursement, revised in March 2026, describes an applicable negotiated-rate framework as well as special categories with fixed or otherwise specified rates. The policy therefore is not simply “every award gets the institution’s negotiated rate”: the award’s mechanism, purpose, recipient, and terms can change how reimbursement is calculated.
What indirect costs pay for
Direct costs are expenses that can be assigned to a particular project with relative ease and accuracy. Indirect costs—also called facilities-and-administration costs—support shared functions that are not readily assignable to one specific cost objective. They help cover the institutional infrastructure used to conduct sponsored research rather than a single project expense.
The distinction matters because an indirect-cost percentage is not necessarily a percentage of the entire award. NIH policy uses modified total direct costs (MTDC) as the calculation base for specified categories. A rate must be read together with its base and the award’s reimbursement terms to understand the actual amount it produces.
How to determine the rate for a particular award
For a specific grant, use the rate and calculation method in the applicable NIH policy and award documents rather than relying on the 15% announcement or a headline figure. Check these details:
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- Rate type: Is the award subject to the recipient’s applicable negotiated rate, or to a fixed or special rate specified for its category?
- Award mechanism and purpose: Does the grant type or activity fall under a specific reimbursement provision?
- Recipient category and location: Does the institution’s status or geography affect which provision or rate agreement applies?
- Calculation base: Is the rate applied to MTDC or another stated base, and what costs are included in that base?
- Effective period and award terms: Which rate agreement period applies, and does the Notice of Award specify an exception or other condition?
These details can produce different reimbursement outcomes even when two awards cite the same percentage. The award’s Notice of Award and the institution’s applicable rate agreement are essential to interpreting the figure.
How the funding figures differ by scope
NIH’s notice reported that in FY2023 the agency spent more than $35 billion on almost 50,000 competitive grants, supporting more than 300,000 researchers at more than 2,500 universities, medical schools, and other research institutions. NIH characterized about $26 billion as direct costs and $9 billion as indirect costs. These are NIH figures for its grant portfolio in FY2023.
A separate Congressional Research Service report, published in 2025 using FY2023 data, said U.S. institutions of higher education reported approximately $109 billion in R&D expenditures: $84.2 billion identified as direct costs and $24.5 billion as indirect costs. That broader higher-education R&D total spans funding sources; it is not an NIH-only spending figure.
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What NIH’s FY2026 update does—and does not—mean
NIH said that the 2024 revisions to 2 CFR Part 200 were incorporated into its FY2026 Grants Policy Statement, issued March 25, 2026. This is an administrative update to the policy statement. It is distinct from the litigation over the 15% cap and does not, by itself, reinstate that cap.
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