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The U.S. Court of Appeals for the First Circuit on January 6, 2026, upheld a district court's decision to permanently enjoin and vacate guidance (Guidance) published by the National Institutes of Health (NIH) early last year. This Guidance would have imposed a flat, 15 percent indirect cost rate on NIH-funded research. Indirect costs, also known as "facility and administration" costs, are those that cannot be specifically attributed to a single research project, such as utilities, specialized laboratory equipment or clinical space.
The decision preserves the NIH's current approach to indirect cost rates, allowing individually negotiated indirect cost agreements, which can vary significantly from institution to institution depending on a variety of accounting considerations. The decision protects billions of dollars in research funding, including funding for research that was already in progress when the Guidance was issued.
The First Circuit agreed with the district court that the Guidance violated both a federal appropriations rider prohibiting the replacement of a negotiated indirect cost rate with a uniform rate and the NIH's regulations regarding negotiated indirect cost rates. The decision also clarified that other mechanisms are available to the NIH to lawfully change indirect cost rates.
Holland & Knight attorneys will continue to monitor developments on this issue.
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