Research Grants Updated July 2026 · 10 min read

The NIH 15% indirect-cost cap is permanently blocked: what it means for your 2026 grant budget

Q: What indirect cost rate should I budget for an NIH grant in 2026?

Use your institution's federally negotiated F&A (Facilities and Administrative) rate, not 15%. Negotiated rates for research-intensive institutions commonly run between 50% and 70% of modified total direct costs, averaging around 58% in a 2025 analysis of NIH-funded institutions, though the effective share of a grant that ends up covering indirect costs is lower (roughly 25% to 45%). Confirm your current negotiated rate and its application with your institution's sponsored-programs or grants-and-contracts office before budgeting.

Q: What are indirect or F&A costs on a grant?

Indirect costs, formally called Facilities and Administrative (F&A) costs, are the real expenses of research that cannot be tied to a single project: buildings and lab space, utilities, equipment depreciation, IT and data systems, libraries, and administrative and compliance staff. They are reimbursed as a percentage of a grant's direct costs, at a rate each institution negotiates with the federal government. Direct costs (salaries, supplies, equipment for the specific project) are separate.

If you budget federal research grants, this is one of the most consequential rulings of the year, and the answer is now settled. NIH's attempt to cap indirect (F&A) cost reimbursement at a flat 15% is permanently blocked. The First Circuit affirmed the injunction on January 5, 2026, and the Justice Department let the Supreme Court deadline pass, so the block is final. For your 2026 budgets, the practical takeaway is simple: use your institution's federally negotiated F&A rate, not 15%. Here is the full picture. If you are new to federal research funding, start with our NIH SBIR/STTR guide.

The one-line versionNIH's 15% indirect-cost cap never took effect and is now permanently enjoined. Budget with your institution's negotiated F&A rate (commonly 50-70%, averaging about 58%), and confirm the current rate with your sponsored-programs office.

15%

The flat cap NIH tried to impose (Feb 2025), now blocked

Jan 5, 2026

First Circuit affirmed the injunction

Apr 6, 2026

DOJ let the Supreme Court deadline pass, block is permanent

~58%

Average negotiated F&A rate at NIH-funded institutions (2025 analysis)

What happened, step by step

The dispute began in early 2025 and ran through the courts for about a year before reaching its permanent conclusion in 2026:

Feb 2025
NIH announces a 15% cap. The agency issued guidance imposing a flat 15% indirect-cost rate on current and new grants, replacing each institution's negotiated rate.
Apr 4, 2025
A federal court permanently enjoins the cap. The US District Court in Massachusetts prohibited HHS from implementing the policy, siding with the universities, associations, and states that sued.
Jan 5, 2026
The First Circuit affirms, unanimously. The appeals court held that NIH violated statutory law and its own regulatory procedures in issuing the cap.
Apr 6, 2026
The deadline to appeal passes. The Department of Justice did not petition the Supreme Court to review the ruling, leaving the injunction in permanent effect.

The 15% cap is not paused or under review. It is permanently enjoined, and your negotiated rate is the rule.

What indirect (F&A) costs actually are

To understand why this matters, it helps to know what indirect costs cover. A grant has two kinds of costs. Direct costs are tied to a specific project: the researchers' salaries, supplies, and equipment for that study. Indirect costs, formally called Facilities and Administrative (F&A) costs, are the shared expenses of doing research that cannot be assigned to one project: laboratory and building space, utilities, equipment depreciation, IT and data infrastructure, libraries, and the administrative and compliance staff who keep federally funded research legal and auditable.

Indirect costs are reimbursed as a percentage of a grant's direct costs, at a rate each institution negotiates with the federal government. A 15% flat cap would have replaced negotiated rates that are often three to four times higher, which is why universities and academic medical centers said it would force deep cuts to research operations.

What it means for your 2026 budget

The practical rule: budget with your institution's negotiated F&A rate, not 15%. Because the cap never took effect and is now permanently blocked, the negotiated rate on file for your institution is what applies to an NIH grant in 2026. For context on where those rates land:

Measure	Typical range	Average
Negotiated F&A rate (research institutions)	50% to 70%	~58%
Effective indirect share of a grant	25% to 45%	~42%

Figures from a 2025 analysis of 354 NIH-funded institutions. Negotiated rates apply to modified total direct costs, so the effective share of the total award that covers indirect costs is lower than the headline rate. Your institution's actual rate is what governs; confirm it with your grants office.

Two practical notes. First, the negotiated rate applies to modified total direct costs, not the whole budget, so certain items (like equipment and subaward amounts above a threshold) are excluded from the base. Second, some programs and mechanisms have their own indirect-cost rules regardless of this ruling: for example, SBIR and STTR awards and many foundation grants use different or capped indirect rates. Always check the specific funding opportunity.

Why the block is durable, not temporary

This is not a temporary win that could flip next month. The reason NIH could not simply impose the cap is that Congress prohibited it. Since fiscal year 2018, appropriations law has barred NIH and HHS from developing or implementing a "modified approach" to determining indirect-cost rates, and the Consolidated Appropriations Act, 2026 (P.L. 119-75) continued that provision. The courts found the 15% cap violated this statutory bar as well as the agency's own rulemaking procedures. So the policy was struck down on the law, not merely halted on a technicality.

What could still change: the appropriations rider is renewed annually, so the protection depends on Congress continuing it. A future cap would require either Congress dropping that provision or a new policy built through proper rulemaking that survives challenge. As of mid-2026, neither has happened, and negotiated rates remain the rule.

What is next: the reform debate

The court fight settled the legality of the 15% cap, but the broader debate over indirect-cost reform continues. In July 2025, national organizations representing academic, medical, and independent research institutions, the Joint Associations Group on Indirect Costs, released the FAIR (Financial Accountability in Research) model, a proposed framework meant to increase transparency and accountability in how federal research funding is spent. It is a voluntary reform proposal, not a government policy, and it signals that institutions expect the indirect-cost conversation to keep evolving even with the cap defeated. For grant seekers, the takeaway is to budget with today's negotiated rates while watching for future policy proposals.

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Frequently asked questions

Is the NIH 15% indirect cost cap still blocked in 2026?

Yes, permanently. A federal district court in Massachusetts permanently enjoined the cap in April 2025, the First Circuit unanimously affirmed on January 5, 2026, and the Department of Justice did not petition the Supreme Court by the April 6, 2026 deadline. With no further appeal, the injunction stands permanently, so the 15% cap is not in effect and institutions' negotiated indirect-cost rates continue to apply.

What indirect cost rate should I budget for an NIH grant in 2026?

Use your institution's federally negotiated F&A rate, not 15%. Negotiated rates for research-intensive institutions commonly run 50% to 70% of modified total direct costs, averaging around 58% in a 2025 analysis, though the effective share of a grant that ends up covering indirect costs is lower (roughly 25% to 45%). Confirm your current negotiated rate and how it applies with your sponsored-programs office before budgeting.

What are indirect or F&A costs on a grant?

Indirect costs (Facilities and Administrative, or F&A, costs) are the real expenses of research that cannot be tied to a single project: buildings and lab space, utilities, equipment depreciation, IT and data systems, libraries, and administrative and compliance staff. They are reimbursed as a percentage of a grant's direct costs at a rate each institution negotiates with the government. Direct costs (project-specific salaries, supplies, equipment) are separate.

Why could NIH not just impose the 15% cap?

Because Congress prohibited it. Since fiscal year 2018, appropriations law has barred NIH and HHS from developing or implementing a modified approach to indirect-cost rates, and the Consolidated Appropriations Act, 2026 (P.L. 119-75) continued that provision. The courts found the 15% cap violated this statutory bar and the agency's own rulemaking procedures, so it was struck down rather than merely paused.

Could NIH try to cap indirect costs again?

Not unilaterally under current law. The appropriations rider that blocks a modified approach is renewed each year, so a future change would require Congress dropping that provision or a new policy developed through proper rulemaking that survives legal challenge. University groups have separately proposed voluntary reform (the FAIR model, July 2025). For now, negotiated rates remain the rule.

Bottom line

The NIH 15% indirect-cost cap is dead. It never took effect, a federal court permanently blocked it, the First Circuit affirmed that block on January 5, 2026, and the government let its final appeal deadline pass. Because the underlying protection is written into appropriations law that Congress renewed for 2026, this is a durable outcome, not a temporary reprieve. For anyone budgeting an NIH grant this year, the instruction is clear: use your institution's negotiated F&A rate, confirm it with your grants office, and check each opportunity for program-specific indirect-cost rules. Keep building your proposal with our grant-proposal guide and gauge your odds in grant success rates by program.

This is educational information about federal grant policy, not legal, financial, or accounting advice. Policy and litigation status change; confirm current NIH guidance and your institution's negotiated rate with your sponsored-programs or grants-and-contracts office before budgeting. Sources: First Circuit ruling (Jan 5, 2026); STAT, Inside Higher Ed, Forbes, and The Hill reporting; Congressional Research Service (IN12516, R48540); Consolidated Appropriations Act, 2026 (P.L. 119-75). Last reviewed July 11, 2026.