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 2012, the spending requirement totaled $592 million.

The amount by which qualifying expenditures, which excludes those involved in the generation of income and for grant-making, exceed that requirement is referred to as the “MRO Qualification Margin.” For 2012, qualifying operating expenditures for medical research totaled approximately $800 million, resulting in an MRO margin of approximately $208 million. In determining whether it has satisfied the MRO requirement, the Institute is permitted to carry forward spending in excess of the requirement for up to four years.