The de minimis indirect cost rate: up to 15% of MTDC

Who can use it

Any recipient or subrecipient that does not have a current federally negotiated indirect cost rate, including a provisional rate. That covers most small and mid-sized nonprofits, which never negotiate a rate. If you have a negotiated rate (a NICRA), you use that instead; see indirect cost rates and NICRAs.

The rules in § 200.414(f)

• You choose the rate, anywhere up to 15%. You are not required to use the full 15%, or to use the de minimis rate at all.
• Federal agencies and pass-through entities may not make you use a lower rate unless a federal statute or regulation requires it.
• No documentation is needed to justify the rate, and you can use it indefinitely.
• Once you elect it, you use it on all your federal awards until you choose to negotiate a rate.
• Each cost must be charged consistently as either direct or indirect, never both. A cost in your indirect pool cannot also appear as a direct line in the budget.
• It cannot be applied to cost-reimbursement contracts issued directly by the federal government under the FAR.

How to calculate it

Multiply your modified total direct costs by the rate you chose. MTDC leaves out equipment, participant support costs and the part of each subaward above $50,000, among other things. With the example budget below, MTDC is $200,000, so a 15% de minimis rate gives $30,000 in indirect costs, for a total request of $280,000.

Where people go wrong

• Applying the rate to total direct costs instead of MTDC. In the example that would claim $37,500 instead of $30,000.
• Counting the whole subaward in the base instead of the first $50,000 of each subaward.
• Charging an expense such as rent or accounting as a direct cost while also recovering it through the de minimis rate.
• Using 15% on an award made before October 1, 2024 that the agency has not amended to the 2024 terms. Check the award.
• Ignoring a program statute that caps indirect or administrative costs. A statutory cap still wins.