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 or be subject to excise tax on its earnings. For 2007, the spending requirement totaled $613 million.

The amount by which expenditures, excluding those involved in the generation of income and grant-making, exceed that requirement is referred to as the "MRO Qualification Margin." For 2007, qualifying expenditures for medical research totaled $599 million. An additional $42 million was spent on construction at the Janelia Farm Research Campus in Loudoun County, Virginia, which opened in August 2006, and for preliminary work on the expansion of the Institute's headquarters in Chevy Chase, Maryland, for total qualified expenditures of $641 million, and a 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, 2007 was $467 million.

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