Congress Blocks Federal Indirect Cost Cap, Adds Monthly NIH Oversight
March 2, 2026 · 2 min read
Jared Klein
The bipartisan FY 2026 spending bills that cleared Congress in January carry a provision that research universities and grant-dependent institutions have been fighting for all year: an explicit ban on capping indirect cost rates at federal science agencies.
The legislation blocks the administration's proposed 15% indirect cost ceiling at the National Institutes of Health, the National Science Foundation, and the Department of Energy — agencies that collectively fund the majority of academic research in the United States.
The Cap That Never Was
The indirect cost fight started in February 2025 when NIH announced it would slash reimbursement rates to 15% of each grant — a move that would have cut billions from university research budgets that cover lab maintenance, equipment, utilities, and administrative support. The DOE followed with the same announcement in April, and NSF in May, even after a federal judge ruled the NIH's original move illegal.
Congress has now settled the matter legislatively. The FY 2026 bills require the Department of Commerce, NASA, and NSF to continue applying negotiated indirect cost rates. Separate language bars the White House Office of Management and Budget from cancelling or ignoring negotiated rates at NSF. The NIH bill includes its own explicit prohibition.
New Reporting Requirements Change the Game
The spending bills also impose new oversight mechanisms. NIH must now provide monthly reports to Congress on grant awards, terminations, and cancellations — a direct response to the administration's attempts to terminate over 7,000 grants totaling more than $3 billion at NIH and NSF during 2025.
Additionally, Congress directed NIH to limit forward-funded awards and maximize the number of new awards in FY 2026, with a required report on multi-year grant selection criteria. The appropriations committees also instructed NIH to continue exploring the FAIR Model — an alternative indirect cost framework proposed by the Joint Associations Group.
What This Means for Grant Applicants
Universities and research institutions can now plan their FY 2026 proposals around their negotiated indirect cost rates with confidence. The legislative language is unambiguous and removes the uncertainty that has hung over proposal budgets for over a year. Grant seekers tracking federal research funding shifts can stay current through Granted.