MRO Qualification Margin

The Institute is classified as a medical research organization (MRO) for federal income tax purposes under Section 170(b)(1)(A)(iii) of the Internal Revenue Code of 1986, as amended. As an MRO, the Institute is required to annually spend at least 3.5% of its average endowment value each year on qualifying expenditures or be subject to excise tax on its earnings. For 2008, the spending requirement totaled $653 million.

The amount by which qualifying expenditures, which excludes those involved in the generation of income and grant-making, exceed that requirement is referred to as the "MRO Qualification Margin." For 2008, qualifying operating expenditures for medical research totaled $659 million, resulting in an operating MRO margin of $6 million. An additional $22 million was spent for capital improvements; 5 million was spent for fit-out at the Janelia Farm Research Campus in Loudoun County, Virginia, which opened in August 2006, and $17 million for the expansion of the Institute's headquarters in Chevy Chase, Maryland, resulting in total qualified expenditures of $681 million, and a total MRO Qualification Margin of $28 million.

In addition to satisfying the MRO requirement on an annual basis, cumulative spending over the most recent four-year period can be considered. The cumulative margin as of August 31, 2008 was $355 million.

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