Sneak Preview: DOE Rescinds Policies Setting Indirect Cost Caps
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The Department of Energy (DOE), to comply with provisions contained in recent congressional funding packages for agencies for fiscal year (FY) 2026, has rescinded policies it issued in 2025 that established caps on indirect cost reimbursements for its grant recipients. These appropriations bills also affect other agency efforts to cap indirect costs.
In April 2025, DOE issued Policy Flash (PF) 2025-22, under which the agency stated that it would no longer use the indirect cost rates negotiated by individual institutions of higher education (IHEs) for grant awards. Instead, it established a standardized 15% indirect cost rate for all grant awards to IHEs issued after April 11, 2025.
On May 8, 2025, DOE issued PF 2025-25, which explained that state and local government recipients of DOE awards should continue to use their negotiated and approved indirect cost rate(s) in applications for awards, but the agency would establish a maximum dollar amount that it would reimburse under awards to these recipients. This limit would be calculated as a percentage of the total project award amount and would be included in the award terms as a cap, which was 10% of the total award amount.
On this same date, DOE issued two other documents (PF 2025-26 and PF 2025-27) that established indirect cost caps for nonprofits organizations (15% of the total award) and for-profit organizations (15% of the total award) (see “DOE Limits Future Indirect Costs for Most Awards,” July 2025). On June 30, DOE issued PF 2025-38, which provided further implementation guidance and terms and conditions related to these indirect cost caps for state and local governments, nonprofits and for-profit organizations.
After the Commerce, Justice, Science; Energy and Water Development; and Interior and Environment Appropriations Act of 2026 (Pub. L. 119-74) was signed into law on Jan. 23, these DOE policy flashes related to adjusting indirect rates are no longer in effect. Section 313 of the law states that “in making federal financial assistance, DOE shall continue to apply the indirect cost rates, including negotiated indirect cost rates, as described in §200.414 [of the uniform guidance (2 C.F.R. Part 200)], including with respect to the approval of deviations from negotiated indirect cost rates, to the same extent and in the same manner as was applied in FY 2024, provided that none of the funds appropriated in this or prior acts or otherwise made available to DOE may be used to develop, modify or implement changes to such negotiated indirect cost rates.”
(The full version of this story has now been made available to all for a limited time here.)
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