Policy Notice: NSF Indirect Cost Rate Alignment to FY 2026 Appropriations

Policy Notice: NSF Indirect Cost Rate Alignment to FY 2026 Appropriations

Notice Number: NSF 26-025

Effective Date: September 1, 2026

Subject: Recission of the policy notice imposing a term and condition implementing a standard 15 percent indirect cost rate for NSF grants and cooperative agreements awards to Institutions of Higher Education (IHEs)

Applies To: All NSF financial assistance awards and subawards issued to IHEs on or after May 5, 2025 subject to the requirements set forth in NSF 25-034, Policy Notice: Implementation of Standard 15% Indirect Cost Rate.

Policy Summary: The U.S. National Science Foundation (NSF) is rescinding its deferred NSF-25-034 Policy Notice, which implemented the standard 15 percent indirect cost rate for awards made to IHEs beginning on May 5, 2025. This action ensures alignment with section 542 of the Commerce, Justice, Science; Energy and Water Development; and Interior and Environment Appropriations Act, 2026 (Public Law 119-74, Division A, Title V) requiring NSF to apply 2024 negotiated indirect cost rates.

Background: On May 2, 2025, NSF issued NSF 25-034, which replaced the need for separately negotiated indirect cost rates, pursuant to 2 CFR 200.414(c), and applied a standard indirect cost rate not to exceed 15 percent of an award made to an IHE.

On June 20, 2025, NSF deferred implementation of NSF 25-034 following the U.S. District Court for the District of Massachusetts, Case No. 1:25-cv-11231-IT, which vacated the policy. In compliance with the court's decision, NSF deferred implementation. NSF, however, incorporated a term and condition applying the 15 percent indirect cost rate limit to IHEs for the entirety of the award if a subsequent court decision permitted implementation of NSF 25-034.

Section 542 of H.R. 6938, the Commerce, Justice, Science; Energy and Water Development; and Interior and Environment Appropriations Act of 2026, now prohibits the limitation of the standard 15% indirect cost rate. To comply with H.R. 6938,NSF is updating its Policy Notice and removing the term and condition from impacted awards.

Implementation: All impacted awards made to IHEs on or after May 5, 2025, will have the following term and condition removed:

“NSF is temporarily pausing implementation of the NSF Policy Notice: Implementation of Standard 15% Indirect Cost Rate, NSF 25-034, through June 13, when a hearing is scheduled to occur in the United States District Court for the District of Massachusetts. New NSF awards issued during this pause will not implement NSF 25-034 but will include a term applying NSF 25-034 for the entirety of the award upon a court decision permitting application of the policy.”

NSF will accept and apply the federally negotiated indirect cost rate as provided in 2 CFR 200.414(c) from all NSF recipients unless otherwise limited by an NSF notice of funding opportunity.

Recipients without a current federally negotiated indirect cost rate (including a provisional rate) may elect to use the de minimis indirect cost rate of up to 15 percent of modified total direct costs (MTDC) consistent with 2 CFR 200.414(f).

Contact Information: For questions or further clarification, please contact:

U.S. National Science Foundation

Office of Award Management

Financial Assistance Requirements Branch
Email: policy@nsf.gov