Key Takeaways
- • The IRS issued Revenue Procedure 2026-20 on October 6, 2026, superseding prior guidance (RP 2025-31) to clarify how eligible investment trusts and grantor trusts can participate in proof-of-stake staking without jeopardizing their tax-favorable status.
- • Staking qualifies as a passive "property-conservation activity" under the safe harbor, allowing compliant trusts to maintain investment-trust and grantor-trust classification under IRC §§ 671–677 while earning staking rewards.
- • Trusts must satisfy 14 stringent requirements to qualify, including: listing on a national securities exchange, holding only a single type of digital asset, using qualified custodians, and maintaining SEC-approved liquidity policies.
- • The guidance resolves a structural tax risk: the IRS had previously viewed active token management as potentially triggering a "power to vary investments," which could disqualify trusts from pass-through tax treatment and force reclassification.
Summary
The IRS has removed a significant tax compliance barrier for crypto trusts seeking to participate in proof-of-stake networks. Revenue Procedure 2026-20, published October 6, 2026, supersedes earlier guidance (RP 2025-31 from November 10, 2025) and establishes clear conditions under which eligible investment trusts and grantor trusts can engage in digital asset staking while preserving their tax-favored status.
The core issue addressed by the guidance centers on the structural nature of trust taxation. Investment trusts derive their pass-through tax treatment partly because they function as passive vehicles. The IRS has historically scrutinized trusts that exercise a "power to vary investments"—the ability to actively manage and reallocate holdings for profit—as this active behavior can trigger reclassification and loss of favorable tax treatment. Staking created ambiguity: does selecting tokens for staking and collecting rewards constitute impermissible active management? The IRS's answer, codified in this safe harbor, is no. Compliant staking is recharacterized as a property-conservation activity, keeping it on the passive side of the taxable line and allowing trusts to maintain their IRC §§ 671–677 status.
However, the safe harbor comes with substantial conditions. Trusts must satisfy 14 detailed requirements with no shortcuts. These include mandatory listing of trust interests on a national securities exchange, restriction to holding a single type of digital asset (eliminating multi-token portfolios within one vehicle), use of qualified custodians for asset safeguarding, and maintenance of SEC-approved liquidity policies. This last requirement directly ties tax treatment to securities regulator oversight, embedding compliance responsibilities across both tax and securities authorities.
The guidance represents a practical resolution for trust sponsors and beneficiaries seeking cryptocurrency exposure while maintaining tax efficiency. By clarifying that properly structured staking does not trigger disqualifying active management, the IRS has opened a pathway for trusts to participate in proof-of-stake ecosystems—a material consideration as blockchain networks increasingly rely on staking mechanisms for security and consensus.
The core issue addressed by the guidance centers on the structural nature of trust taxation. Investment trusts derive their pass-through tax treatment partly because they function as passive vehicles. The IRS has historically scrutinized trusts that exercise a "power to vary investments"—the ability to actively manage and reallocate holdings for profit—as this active behavior can trigger reclassification and loss of favorable tax treatment. Staking created ambiguity: does selecting tokens for staking and collecting rewards constitute impermissible active management? The IRS's answer, codified in this safe harbor, is no. Compliant staking is recharacterized as a property-conservation activity, keeping it on the passive side of the taxable line and allowing trusts to maintain their IRC §§ 671–677 status.
However, the safe harbor comes with substantial conditions. Trusts must satisfy 14 detailed requirements with no shortcuts. These include mandatory listing of trust interests on a national securities exchange, restriction to holding a single type of digital asset (eliminating multi-token portfolios within one vehicle), use of qualified custodians for asset safeguarding, and maintenance of SEC-approved liquidity policies. This last requirement directly ties tax treatment to securities regulator oversight, embedding compliance responsibilities across both tax and securities authorities.
The guidance represents a practical resolution for trust sponsors and beneficiaries seeking cryptocurrency exposure while maintaining tax efficiency. By clarifying that properly structured staking does not trigger disqualifying active management, the IRS has opened a pathway for trusts to participate in proof-of-stake ecosystems—a material consideration as blockchain networks increasingly rely on staking mechanisms for security and consensus.
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