The short version: NIH’s flat 15% indirect-cost cap (Notice NOT-OD-25-068, February 2025) is dead. The First Circuit Court of Appeals unanimously upheld the permanent injunction against it on January 5, 2026, and the Department of Justice let its Supreme Court appeal deadline lapse on April 6, 2026 without filing — ending the litigation for good. Separately, Congress has now blocked equivalent caps at NIH, the Department of Energy, and the National Science Foundation through its own appropriations riders, twice over in NIH’s case. The one thing that hasn’t ended: the administration’s FY2027 budget request asks Congress to remove that protection and try again, and Congress will have to reject that ask every year the request comes back.
What actually resolved
NIH’s February 7, 2025 notice tried to replace every institution’s individually negotiated F&A rate with a flat 15% rate for NIH awards — a change our earlier NIH indirect cost cap guide covers in full, including the litigation timeline through July 2026. What’s new since then is that the litigation itself has fully concluded, with no further appeal possible through this case:
- January 5, 2026 — The US Court of Appeals for the First Circuit unanimously affirmed the district court’s permanent injunction. Writing for the panel, Circuit Judge Kermit Lipez held that “Congress went to great lengths to ensure that NIH could not displace negotiated indirect cost reimbursement rates with a uniform rate.”
- April 6, 2026 — The Department of Justice’s deadline to petition the US Supreme Court for review lapsed without a filing. Reporting at the time (STAT News, corroborated by R&D World, C&EN, and McAllister & Quinn) described the administration as having ended the court fight over the cap.
That closes the case. The permanent nationwide injunction — first issued by the US District Court for the District of Massachusetts on April 4, 2025 — stands as the final word from the judiciary. NIH grants continue to be reimbursed under each institution’s own negotiated indirect cost rate agreement (NICRA), not a flat rate. Absent an entirely new lawsuit over a differently designed policy, there is no live litigation left to track on this specific mechanism.
The other reason it’s blocked: Congress, not just the courts
The injunction was never the only barrier. Since the FY2018 Labor-HHS appropriations act, Congress has renewed a rider every year barring HHS from using appropriated funds to develop or implement a modified approach to how NIH indirect-cost rates are set. The Consolidated Appropriations Act, 2026 (P.L. 119-75, Division B, §224) continued that rider again for the current fiscal year. In other words, even if a future court ruled differently, HHS still couldn’t lawfully fund the work of implementing a cap like NOT-OD-25-068 without Congress removing this language first.
The Department of Energy went through a parallel version of the same story on a faster timeline. DOE had separately imposed its own indirect-cost caps (15% for nonprofit and for-profit recipients, 10% for state and local governments) via a series of internal policy flashes. Congress addressed those directly: H.R. 6938, the Commerce, Justice, Science; Energy and Water Development; and Interior and Environment Appropriations Act, 2026, was signed into law in late January 2026, and Section 313 requires DOE to apply indirect cost rates under 2 CFR 200.414 “to the same extent and in the same manner” as fiscal year 2024, while barring the agency from using appropriated funds to develop, modify, or implement any change to negotiated rates. DOE responded by issuing PF-2026-30 on January 27, 2026, formally rescinding every prior policy flash that had imposed a cap.
The same FY2026/FY2027 Commerce-Justice-Science appropriations report language directs the National Science Foundation, NASA, and the Department of Commerce — alongside DOE — to continue applying indirect cost rates negotiated for FY2024 and bars unilaterally changing them. It’s worth being precise about which law protects which agency: H.R. 6938 (and its CJS report language) is what stopped DOE’s and NSF’s caps; the separate, older Labor-HHS rider carried forward in P.L. 119-75 is what stops HHS/NIH from trying again administratively. They’re two different bills reaching the same substantive outcome for different agencies, not one law covering all of them.
What isn’t resolved: the annual budget-request cycle
None of this means the underlying policy goal has gone away. The administration’s FY2027 budget request, released in early April 2026, again proposed a flat 15% indirect-cost cap for NIH — and this time proposed eliminating the Labor-HHS appropriations rider outright, rather than working around it. Congress had already rejected the equivalent ask for FY2026, renewing the rider instead of removing it. Reporting through mid-2026 on the FY2027 appropriations cycle shows Congress continuing to reject comparable cap language for NSF, DOE, NASA, and Commerce as well, trending the same direction as FY2026 rather than reversing it — but an appropriations rider only lasts as long as the appropriations act that contains it, and has to be renewed, or reproposed for removal, every single cycle. That is a genuinely different kind of risk than active litigation: no court case to watch, no injunction to track, just a recurring line in an annual budget process that research-administration associations (COGR, AAU, APLU, NACUBO) have so far succeeded in defending against, year after year.
What research offices should actually do now
- Stop tracking this as active litigation. There is no pending case on NIH’s 15% cap specifically. Budget and compliance planning can treat negotiated F&A rates as the operative rule for NIH awards, not a rate under active legal threat.
- Do still track the appropriations calendar. The FY2027 cycle is the mechanism that matters now, not a docket. If the administration succeeds in getting the Labor-HHS rider removed in a future appropriations act, a new cap could be implemented administratively without a new round of litigation needed to challenge the underlying legal theory that already lost twice.
- Confirm your institution’s own NICRA and subaward calculations reflect current NIH notices separately from the cap story — NIH has continued adjusting narrower indirect-cost mechanics (subaward F&A thresholds, the de minimis rate) through ordinary notices even while the flat-cap litigation was pending; see our coverage of NOT-OD-26-072’s reversal of two of those flexibilities, which is unrelated to the cap litigation but easy to conflate with it.
- Don’t assume the DOE/NSF resolution automatically extends to every federal sponsor. Each agency’s indirect-cost policy is governed by its own appropriations language and, in some cases, its own separate litigation (see our coverage of the 2026 NSF funding and litigation landscape) — confirm the current status for each sponsor an institution actually holds awards from rather than generalizing from the NIH outcome.
For the full policy background — what the cap would have changed, NIH’s stated rationale, the FAIR model research associations proposed as an alternative, and the complete litigation timeline from the original February 2025 notice forward — see the companion NIH indirect cost cap guide, which this piece updates with the case’s actual resolution.
