No-cost extensions of NIH grants - What I just learned

I learned something this month that surprised me about no-cost extensions of NIH grants, so I thought I’d share it.  A no-cost extension means that you are allowed to use money left over from the last year of your grant for an additional period of time.  From what I understand, NIH has granted universities the ability to simply request one extra year and this is automatically approved.  Again, no new money.  You’re just allowed to use up the money you didn’t spend in your last year of a grant. 

I had always assumed there was a limit of 25% of the money from your last year that you could carry forward to an extra year, but this is wrong.  I assumed this because in a multiyear grant like an R01, you cannot carry forward more than 25% of funding period 1’s (year 1’s) money into funding period 2 (year 2), for example. However, the no-cost extension is actually an extension of the length of time for the final funding period.  It is not considered carryover of funds into a new funding period.  Thus, the 25% rule does not apply.  This means that if you’re really worried about obtaining new funding (like I am), you can cut back in that final year of a grant and split the money over two years.  I’m not saying this is a good idea.  I’m just saying this option is available.