- What is the de minimis indirect cost rate?
- Who qualifies to elect it
- De minimis rate vs a negotiated rate (NICRA)
- Documentation and compliance requirements
- Common questions
- Implications for research administrators
Every proposal budget has to answer one question: how will the institution recover the overhead it spends supporting a federally funded project? For organisations without the staff or history to negotiate a formal rate, the de minimis indirect cost rate is a standing, no-negotiation alternative built directly into the federal Uniform Guidance. It lets an eligible non-federal entity recover indirect costs on a federal award without submitting a full indirect cost rate proposal — but the rate itself, and the rules around electing it, changed materially in 2024, and many summaries in circulation still cite the old figure.
What is the de minimis indirect cost rate?
The de minimis rate is a fixed indirect cost recovery option set out in 2 CFR 200.414(f), the cost-principles section of the OMB Uniform Guidance that governs federal grants and cooperative agreements. It exists so that organisations without a current Negotiated Indirect Cost Rate Agreement (NICRA) are not forced to either forgo indirect cost recovery entirely or undertake a formal rate negotiation with a cognizant federal agency.
Effective 1 October 2024, OMB revised 200.414(f) and raised the rate from a flat 10% to up to 15% of Modified Total Direct Costs (MTDC). This is the single most important recent change to the rule, and it altered its character: the rate is no longer automatically 10%, nor is it automatically 15%. The “up to” language means an electing organisation should be able to justify the rate it applies, particularly if its actual indirect costs run below 15% of MTDC.
MTDC is a defined cost base, not simply total direct costs. It includes direct salaries and wages, applicable fringe benefits, materials, supplies, services, travel, and the first $50,000 of each subaward. It excludes equipment, capital expenditures, patient care charges, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of any subaward beyond $50,000.
Who qualifies to elect it
Eligibility is narrower than the phrase “de minimis” suggests. Under 2 CFR 200.414(f):
- The entity must be a non-federal recipient or subrecipient — a state or local government, Indian tribe, institution of higher education, or non-profit organisation.
- The entity must not currently hold a NICRA. An organisation that has never negotiated a rate, or whose prior agreement has expired without renewal, is generally the target user.
- For-profit entities are not eligible. Cost principles for commercial organisations sit under FAR Subpart 31.2, not 2 CFR 200 Subpart E, so the de minimis election in 200.414(f) simply does not apply to them.
- Once elected, the rate must be applied consistently across all of the entity’s federal awards until it either negotiates a NICRA or its circumstances otherwise change; it cannot be selectively applied to some awards and not others.
In practice, the de minimis rate is used most often by first-time federal grantees, small non-profits, and institutions with genuinely modest indirect costs — organisations for whom the administrative cost of preparing a full rate proposal would exceed the financial benefit of a more precisely calculated rate.
De minimis rate vs a negotiated rate (NICRA)
Choosing between the de minimis rate and a negotiated agreement is a genuine trade-off, not a formality. A NICRA requires submitting a detailed indirect cost rate proposal to a cognizant federal agency, supported by an audited or auditable cost allocation base, and typically takes months to negotiate. The de minimis rate requires no proposal and no negotiation at all.
| Factor | De minimis rate (up to 15% of MTDC) | Negotiated rate (NICRA) |
|---|---|---|
| Documentation to elect | None required; self-certified election | Formal indirect cost rate proposal with supporting cost data |
| Time to establish | Immediate | Typically several months of negotiation |
| Rate accuracy | Fixed ceiling, may under-recover true indirect costs | Reflects the institution’s actual cost structure |
| Best suited to | First-time or small-scale federal recipients with modest overhead | Institutions with sustained federal funding and indirect costs above 15% of MTDC |
| Flexibility once set | Must be applied consistently to all federal awards | Rate is fixed for the negotiated period, then renegotiated |
For institutions whose actual indirect costs genuinely sit at or below 15% of MTDC, the de minimis rate is a reasonable long-term choice — it avoids the recurring administrative burden of rate renegotiation. For research-intensive institutions with substantial facilities and administrative costs, a negotiated rate almost always recovers more, because negotiated F&A rates at research universities commonly run well above 15% of MTDC.
Documentation and compliance requirements
The de minimis election requires no formal proposal, but it is not a documentation-free zone. Institutions should still:
- Retain a clear internal decision record showing the rate elected and the justification, especially where the rate applied is below the full 15% ceiling.
- Apply the cost base correctly — errors in MTDC calculation, such as including full subaward amounts above $50,000 or capital equipment, are among the most common audit findings.
- Maintain consistency: costs charged as indirect under the de minimis rate cannot also be charged directly to the same award, and vice versa.
- Track award-level restrictions, since some individual federal programmes cap or exclude indirect cost recovery regardless of an entity’s general de minimis election.
Common questions
What is a de minimis indirect cost rate?
The de minimis indirect cost rate is a standard rate that eligible non-federal entities without a current negotiated agreement may apply to recover indirect costs on federal awards. It is capped at 15% of Modified Total Direct Costs and requires no formal rate proposal to use.
When did the de minimis indirect cost rate change?
OMB revised 2 CFR 200.414(f) effective 1 October 2024, raising the de minimis rate from a flat 10% to up to 15% of MTDC for new federal awards. Awards issued before that date may still reference the earlier 10% figure.
What is the current de minimis rate?
As of the 2024 Uniform Guidance revision, the current ceiling is 15% of MTDC. Because the regulation uses “up to” language, an organisation should be able to support the specific rate it elects rather than assume 15% applies automatically.
How do you use the de minimis rate?
An eligible entity elects the rate by applying it directly to its Modified Total Direct Costs base on a federal award, with no application or negotiation required. Once elected, the entity must use it consistently across all federal awards until it negotiates a formal rate.
Implications for research administrators
The de minimis rate should not be confused with a separate and unresolved policy debate: proposed caps on negotiated indirect cost rates. In 2025, NIH and later other federal science agencies proposed capping F&A reimbursement at 15% even for institutions that already hold a NICRA well above that figure — a distinct move from the de minimis election, which has always applied only to entities without a negotiated rate. Those cap proposals drew legal challenges from higher-education associations and remain contested in federal court as of this writing. Research administrators should track the two issues separately: one is a stable, settled recovery option for smaller or first-time recipients; the other is a live policy dispute over whether research-intensive institutions’ existing negotiated rates can be unilaterally reduced.
For institutions building or reviewing their research administration infrastructure, the practical takeaway is to treat the de minimis election as a genuine strategic choice rather than a default. Model the actual indirect cost recovery under both the de minimis ceiling and a hypothetical negotiated rate before committing, since the consistency requirement makes switching mid-portfolio administratively costly. As federal cost-recovery policy continues to shift, institutions that document their rate rationale clearly will be best placed to adapt.
