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H 3428

An Act enhancing the effectiveness of nonprofits’ core mission work through full cost funding

194th Legislature (2025-2026) Introduced by Mindy Domb and 1 co-sponsor

Requires state-funded nonprofit grants/contracts to reimburse indirect costs (overhead) at NICRA rate, or 15% MTDC if no NICRA, or a negotiated rate with EOAF.

Bill reported favorably by committee and referred to the committee on House Ways and Means
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Bill Summary · H 3428

Summary of House Bill H. 3428 – An Act enhancing the effectiveness of nonprofits’ core mission work through full cost funding

Overview

  • Bill number: H.3428
  • Title: An Act enhancing the effectiveness of nonprofits’ core mission work through full cost funding
  • Primary sponsors: Representatives Andres X. Vargas (3rd Essex) and Mindy Domb (3rd Hampshire)
  • Introduced: February 27, 2025
  • Committee: State Administration and Regulatory Oversight
  • Purpose: To ensure nonprofit organizations that receive state-funded grants or contracts are able to recover indirect costs (overhead) in addition to direct program expenses, thereby supporting the nonprofits’ ability to carry out their core missions.

Key provisions

  • New statutory section inserted: The bill amends Chapter 29 of the General Laws by adding Section 6BB (a)–(c).
  • Definitions:
    • “Indirect costs” are those costs recognized as indirect under 2 C.F.R. 200.414 (OMB Uniform Guidance).
    • “NICRA” = Negotiated Indirect Cost Rate Agreement with the federal government.
    • “Nonprofit organization” = 501(c)(3), (4), or (6).
    • “OMB Uniform Guidance” = 2 C.F.R. 200 requirements and related OMB guidance.
  • Reimbursement of indirect costs for state-funded grants/contracts:
    • If a nonprofit is a direct recipient or subrecipient of a grant/contract funded wholly by state funds or by state funds plus non-federal funds, the grant/contract terms must allow reimbursement of indirect costs.
    • Indirect costs must be reimbursed: 1) At the NICRA rate the nonprofit has negotiated and received for a direct federal award, if that rate is current/unexpired; or 2) If no NICRA: a rate of at least 15% of Modified Total Direct Costs (MTDC) as defined by the OMB Uniform Guidance; or 3) By negotiating a new indirect cost rate with the Executive Office of Administration and Finance (EOAF) per guidelines set by the Secretary of EOAF.
  • Scope of applicability: Applies whether funds are transferred directly by the state or through a third party to the nonprofit.
  • Objective: Promote “full cost funding” by ensuring nonprofits can cover indirect costs tied to their programs, not just direct program expenses.

Who is affected

  • Nonprofit organizations that receive state-funded grants or contracts (directly or via entities acting as intermediaries) and operate under 501(c)(3), (4), or (6).
  • State agencies and the Executive Office of Administration and Finance (EOAF), which would outline guidelines and negotiate rates when NICRA is not in place.

Procedural and timeline aspects

  • Hearing status: Hearing rescheduled to November 5, 2025 (11/05/2025) with location changes noted (B-2 and Virtual; later references show A-2 as well).
  • Status timeline:
    • 02/27/2025: Referred to the committee on State Administration and Regulatory Oversight; Senate concurrence noted.
    • 10/27–10/29/2025: Hearing date set for 11/05/2025 with relocation/virtual options.
  • Related bills: Similar matter previously filed (e.g., H.3122 in 2023-2024).

Potential impact

  • Improves financial sustainability for nonprofits performing state-funded work by ensuring reimbursement for indirect costs.
  • Creates a clear framework for calculating and negotiating indirect cost rates, reducing underfunding of overhead.
  • Aligns Massachusetts practice with federal indirect cost principles when utilizing NICRA or minimum 15% MTDC fallback.
  • Requires state contracts/grants to include terms permitting indirect cost recovery, potentially affecting grant budgeting and contract amendments.

Overall, H.3428 aims to strengthen nonprofit capacity to fulfill mission-driven work by ensuring full cost funding through established indirect cost reimbursement mechanisms.

Compiled from official sources — confirm details with the bill’s official record.

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