Alec Simantov
Alec is a Director in the McAllister & Quinn Research Universities Practice. Alec leverages his expertise on the federal budget and Congress to provide strategic intelligence and oversight on legislative and policy developments, focusing on R&D, science, and higher education policy.
Kate Price, RN, MPH
Kate Price, RN, MPH, is the Director of the Healthcare Practice at McAllister & Quinn, a federal grants and strategic consulting firm. She provides critical research support, identifies funding opportunities, and produces legislative analyses to advance client strategies.
NIH Blocked from Capping Indirect Cost Rates
The Trump administration has effectively surrendered in its current legal fight to slash indirect costs that awarded institutions receive as an embedded component of National Institutes of Health (NIH) grants. The administration failed to meet the Department of Justice’s (DOJ) April 6, 2026, deadline to petition the Supreme Court to review the First Circuit Court of Appeals’ ruling that blocks NIH from implementing a 15% cap on indirect cost rates (ICR) for extramural research. The failure of DOJ to appeal the ruling leaves the court’s original injunction in permanent effect.
This development marks an end to a litigation effort beginning in February 2025 by states and a coalition of health associations to protect their individually negotiated ICRs with NIH. The lawsuits argued that the policy violated appropriations law, as Congress has placed a prohibition on NIH from unilaterally changing negotiated ICRs since fiscal year 2018 (FY18), when the first Trump administration attempted to set an ICR cap at 10.
Why Indirect Costs Are Essential to Research Institutions
Indirect/overhead costs cover expenses that are also known as Facilities & Administrative (F&A) Costs—such as rent, utilities, maintenance, and shared administrative expenses, personnel costs, etc.—that cannot directly be tied to an individual research project. According to a 2025 economics study based on data from over 350 NIH-funded institutions, negotiated ICRs averaged 58% of modified total direct costs, the portion of direct costs on which indirect costs are calculated. Recovering these infrastructure costs is essential to a research institution’s ability to effectively function and maintain core services and facilities.
For those institutions with a federally-negotiated indirect cost rate, the cognizant federal agency has entered into an agreement with the individual institution to determine and recognize the ratio of indirect costs to direct project expenses that the institution needs to function and to reimburse them at the agreed-upon rate while the agreement is in effect.
The U.S. government is the largest funder of research and development as well as indirect costs for academic institutions, and these costs cannot easily be made up through other types of funding, as private funders often pay little or nothing toward indirect costs. This preservation of indirect cost funding for research through Congress’ “power of the purse” will help ensure the ongoing operational capacity of American research institutions and the country’s status as a major global force for medical and scientific research advancements.
Let's Look at the History of the Indirect Cost Rate Legal Battle
February 10, 2025
On February 10, 2025, a coalition of 22 state Attorneys General filed suit against NIH and the U.S. Department of Health and Human Services in the U.S. District Court for the District of Massachusetts, alleging that the agency acted unlawfully in unilaterally imposing the IDC cap without proper rulemaking. A second lawsuit was filed by a coalition of health associations, led by the Association of American Medical Colleges (AAMC), challenging the same policy on similar procedural and substantive grounds.
In response to the AAMC lawsuit, on February 10, 2025, District Judge Angel Kelley issued a nationwide temporary restraining order (TRO), halting implementation of the 15% cap pending further litigation.
The Future of Indirect Costs
The President’s FY27 Budget Request for NIH continues to call for a 15% ICR cap. However, because the DOJ did not petition the Supreme Court to hear the case, this change would only be possible through an act of Congress. Final FY26 appropriations for NIH included a congressionally mandated prohibition on adjusting indirect cost rates for organizations from their individually negotiated rates for the full fiscal year.
Congress also added language in the bill prohibiting the Office of Management and Budget from engaging in any rulemaking to change the Uniform Guidance with respect to ICR rates and directed the House and Senate Appropriations Committees to work with the Joint Associations Group on alternative proposals to IDC reform, including the Financial Accountability in Research (FAIR) model. Congress has repeatedly expressed its opposition to across-the-board ICR caps and will likely continue to prohibit NIH and the administration from implementing unilateral changes via appropriations language.
Resources Are Available
For more information on NIH ICRs, see this overview from the Congressional Research Service.
The McAllister & Quinn Difference
McAllister & Quinn continues to track ongoing litigation and policy developments regarding indirect costs, ensuring our clients are prepared for critical developments shaping the policy landscape in Washington, DC. If you are interested in learning more, contact us to schedule a free 15-minute introductory call
