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 2009, the spending requirement totaled $531 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 2009, qualifying operating expenditures for medical research totaled $699 million, resulting in an operating MRO margin of $168 million. An additional $31 million was spent for the expansion of the Institute's headquarters in Chevy Chase, Maryland, resulting in total qualified expenditures of $730 million, and a total MRO Qualification Margin of $199 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, 2009 was $397 million.