Courts and Congress Double-Lock NIH Indirect Cost Rate Protections
February 26, 2026 · 2 min read
Jared Klein
Universities and research institutions that depend on NIH grants got a rare double layer of protection: a federal appeals court upheld the permanent block on the proposed 15% indirect cost cap, and Congress wrote the same prohibition directly into the FY2026 spending law.
The Court Ruling
On January 6, the U.S. Court of Appeals for the First Circuit affirmed a lower court's decision permanently enjoining NIH's guidance that would have imposed a flat 15% indirect cost rate on all federally funded research. The current system uses individually negotiated rates — typically 50–65% at major research universities — that reimburse institutions for facilities, administration, compliance infrastructure, and laboratory overhead.
The three-judge panel agreed that the proposed cap violated both a federal appropriations rider prohibiting the replacement of negotiated rates with a uniform rate and NIH's own published regulations governing how those rates are set.
The Congressional Backstop
Separately, the Consolidated Appropriations Act of 2026 — passed by the House 217–214 on February 3 — includes explicit statutory language requiring indirect cost provisions to continue as they were in the third quarter of FY2017. The law further bars NIH from using any appropriated funds to develop or implement a modified approach to rate-setting.
The DOE separately rescinded its own parallel indirect cost policy, and Congress included similar protective language covering DOD grants. The message across agencies is consistent: negotiated rates stand.
What Research Institutions Should Know
The immediate risk is neutralized from two independent directions — even if a future court reversed the injunction, the statutory language would independently block the cap. But the political appetite for cutting indirect costs has not disappeared. Grant officers should document how their negotiated rates support essential research infrastructure, building a defensible record for future budget cycles.
For tracking policy shifts that affect your NIH-funded portfolio, Granted surfaces regulatory and legislative changes in real time. In-depth analysis of indirect cost strategy is on the Granted blog.