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SD 823

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

194th Legislature (2025-2026) Introduced by Pavel Payano

Massachusetts bill requires state grants/contracts to reimburse nonprofits for indirect costs, at NICRA rate or 15% MTDC if no NICRA, boosting core-mission funding.

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Bill Summary · SD 823

Summary: An Act enhancing the effectiveness of nonprofits’ core mission work through full cost funding (Senate Docket No. 823)

Overview

This proposed Massachusetts bill would amend Chapter 29 of the General Laws to ensure that nonprofit organizations receiving state grants or contracts are reimbursed for indirect costs. The core goal is to support nonprofits’ ability to carry out their core mission work by funding the full cost of their operations, including overhead.

  • Bill number and title: Senate Docket No. 823, “An Act enhancing the effectiveness of nonprofits’ core mission work through full cost funding.”
  • Introduced: January 14, 2025 (as part of the 194th General Court; presented by Sen. Pavel M. Payano).
  • Status: Proposed bill (status not stated in the provided text).

Key provisions

Section 6BB (new section added to Chapter 29)

  • Definitions (subsection a):

    • “Indirect costs” are those that would be considered indirect costs under 2 C.F.R. 200.414 (OMB Uniform Guidance).
    • “NICRA” means a Negotiated Indirect Cost Rate Agreement between the federal government and the nonprofit, used to calculate indirect costs for federal awards.
    • “Nonprofit organization” means an organization tax-exempt under § 501(c)(3), (4), or (6) of the Internal Revenue Code.
    • “OMB Uniform Guidance” refers to the federal requirements in 2 C.F.R. Part 200 and related guidance.

  • Indirect cost reimbursement (subsection b):

    • If a nonprofit is a direct recipient or subrecipient of a grant/contract funded wholly with state funds or with a mix of state and non-federal funds, the grant/contract terms must allow indirect cost reimbursement.
    • Reimbursement rates: 1) At the NICRA rate the nonprofit has negotiated and received for a direct federal award, provided the NICRA rate is current/unexpired. 2) If the nonprofit has not negotiated a NICRA:
      • (i) Reimburse indirect costs at a rate of at least 15% of Modified Total Direct Costs (MTDC) under OMB Uniform Guidance.
      • (ii) Allow the nonprofit to negotiate a new indirect cost rate with the Executive Office of Administration and Finance (EOAF) according to guidelines established by the Secretary of EOAF.

  • Scope (subsection c): The indirect cost reimbursement obligation applies whether state funds are transferred directly or via a third party to the nonprofit.

Who is affected

  • Directly affected entities: Nonprofit organizations that receive Massachusetts state grants or contracts for service provision, whether the funds come directly from the state or through a third party.
  • State entities: State agencies and the Executive Office of Administration and Finance (EOAF) would play a role in negotiating and approving indirect cost rates when NICRA is not available.
  • Broader impact: The measure aligns state funding practices with federal indirect cost principles, potentially increasing the administrative overhead reimbursed to nonprofits.

Procedural and timeline aspects

  • The text does not specify an effective date or sunset; typical enactments would include an enactment/operative date upon passage or a future date defined in the statute.
  • The process envisions ongoing negotiations with EOAF for non-NICRA awards, using established guidelines from the Secretary of EOAF.

Potential impact and considerations

  • Positive implications for nonprofits: Greater financial stability by covering overhead and indirect costs, enabling fuller execution of mission-related work.
  • Fiscal implications for the state: Potentially higher grant/contract costs due to indirect cost reimbursement at NICRA or a 15% MTDC baseline; may require budgeting adjustments and administrative capacity for rate negotiations.
  • Administrative considerations: Requires clear implementation procedures for rate determinations, timing of reimbursements, and coordination between state agencies and nonprofits.

This summary focuses on the bill’s substantive changes to funding practices for state-funded nonprofits and how indirect costs would be treated under Massachusetts law.

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

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