Energy Department Rescinds Implementation of Indirect Cost Policy
Energy Department Rescinds Implementation of Indirect Cost Policy
Effective January 23, 2026, the Department of Energy (DOE) has officially rescinded a series of 2025 policy flashes that sought to cap indirect cost reimbursements across multiple classes of grant recipients. The reversal follows provisions included in FY 2026 appropriations legislation, as well as multiple successful court challenges.
In 2025, DOE attempted to impose new indirect cost caps, including:
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15% rate for institutions of higher education (PF 202522)
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10% cap for state and local governments (PF 202525)
These actions prompted lawsuits from universities, associations, and states. Federal district courts in Massachusetts and Oregon ultimately vacated the major policies and enjoined DOE from implementing them.
The FY 2026 Energy and Water Development Appropriations Act (Pub. L. 11974) expressly requires DOE to: Continue applying negotiated indirect cost rates as defined in 2 C.F.R. § 200.414 and to refrain from developing or implementing any changes to these rates. As a result, all DOE policy flashes imposing indirect cost caps—PF 202522, 25, 26, 27, and 38—are no longer in effect.
Congress included similar directives for other research agencies. Pub. L. 11974 requires NSF, NASA, and the Department of Commerce to maintain FY 2024 indirect cost practices. The Consolidated Appropriations Act of 2026 (Pub. L. 11975) applies longstanding NIH language requiring indirect cost rates to be handled as they were in the third quarter of FY 2017, effectively blocking NIH’s recent attempt to impose a 15% cap—an action already halted by courts.
