Congress Pushes Back on Trump Indirect Cost Caps

Congress is again attempting to block the Trump administration from imposing indirect cost caps on federal grants. In the fiscal year 2026 funding bills released this month, congressional appropriators included language that would maintain the current indirect costs system. The provisions mirror language included in appropriations bills since 2017, after the first Trump administration attempted to cap indirect cost rates at the National Institutes of Health. Leaders in both parties have said they intend to pass the bills before federal funding expires at the end of January.

The accompanying bill reports note “room for improvement” in the indirect costs system and would direct agencies to study — but not implement — alternatives such as the Financial Accountability in Research (FAIR) model. A spokesperson for the higher education associations behind that model, the Joint Associations Group, said the JAG intends to work with Congress to implement FAIR as part of the appropriations process for fiscal year 2027.

The White House and research organizations spent much of last year battling over indirect costs, the portion of a grant that covers expenses such as equipment and facilities maintenance, IT services, and administrative support. For federal research grants, universities negotiate indirect costs, also called facilities and administrative costs, with the government as a percentage of direct costs. For example, an indirect cost rate of 50% means that for every dollar awarded as part of a research grant for eligible direct costs, the institution would receive an additional 50 cents to cover indirect costs.

Some universities currently have indirect cost rates of 60% or higher, while the minimum rate that any university may use is 15%. Last February, NIH announced a 15% cap on all indirect cost rates, soon followed by similar announcements from the Department of Energy, the National Science Foundation, and the Department of Defense. Courts have consistently blocked the implementation of those caps in response to lawsuits.

The latest appropriations bills would block indirect cost changes by the White House Office of Management and Budget, which authors the regulations governing indirect costs. The bills would also block such changes at major science agencies, including those that attempted the caps, NASA, and the Commerce Department. The bill for DOE, NSF, NASA, and the Commerce Department has already passed both chambers, and the White House has indicated the president will sign it. The other bills, which cover OMB, NIH, and DOD, are not as far along, but also appear likely to pass.

Amid the backlash to the White House-led caps last year, some members of the research community said Congress was interested in making significant changes to the indirect costs system. “It’s very clear from Congress and the White House… simply explaining F&A, as we’ve done in the past, is really not a viable option anymore; we need a better model,” former Director of the White House Office of Science and Technology Policy Kelvin Droegemeier said at a May webinar on indirect costs.

The FAIR model would split indirect costs into two categories: essential research performance support (ERPS) and general research operations (GRO). ERPS covers costs that can be calculated as part of specific projects, such as expenses related to regulatory compliance, award oversight, information services, and facilities, while GRO covers institution-wide costs such as human resources and procurement. The model would eliminate the rate negotiation process, instead calculating most ERPS costs in raw dollars and limiting GRO costs to 15% of the total award.

The detailed reports accompanying the appropriations bills each reference the FAIR model by name and state that it merits further consideration.

“We have been working with [appropriators] in earnest on the FAIR model and have seen lots of support for it — including supportive report language in some of the appropriations measures — in both chambers and both parties,” JAG spokesperson Rob Marus said. “This so-called ‘blocking language’ will allow us to work with Congress to begin implementing a new model as part of the FY27 appropriations process,” he added.

Codifying the language in the latest appropriations bills may lend further support to plaintiffs fighting current or future caps in court. In a recent ruling against NIH, an appeals court found that NIH’s cap violated a similar provision that Congress has included in spending bills since the Trump administration first proposed altering rates at the agency in 2017.

NIH may still appeal the decision to the Supreme Court. DOE and DOD have appealed the district court decisions ruling against their cap attempts, while NSF moved to dismiss its own appeal.