What is a De Minimis Rate?

The de minimis rate is the percentage of the Modified Total Direct Cost (MTDC) that can be used by non-governmental entities who do not have a negotiated Indirect Cost Agreement. Effective October 1, 2024, the de minimis rate increased from 10% to 15%. The recipient is authorized to determine the appropriate rate up to this limit. When applying the de minimis rate, costs must be consistently charged as either direct or indirect costs and may not be double charged or inconsistently charged as both. The de minimis rate does not require documentation to justify its use and may be used indefinitely. Once elected, the recipient or subrecipient must use the de minimis rate for all Federal awards until the recipient or subrecipient chooses to receive a negotiated rate.

MTDC includes all direct salaries and wages, applicable fringe benefits, materials and supplies, services, and travel. MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs.

The proper use and application of the de minimis rate is the responsibility of the award recipient. The awarding federal agency may perform a financial monitoring review to ensure compliance with 2 C.F.R. Part 200. All costs must be allowable per 2 CFR 200 and the AFG funding notice, allocable and reasonable and consistently charged as either indirect or direct costs but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all federal awards until such time as a non-federal entity chooses to negotiate for a rate, which the non-federal entity may apply to do at any time.

For additional information, please see: https://www.ecfr.gov/current/title-2/part-200/subject-group-ECFRd93f2a98b1f6455#p-200.414(f)