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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesYes—but only a narrowly defined kind of trust can use the IRS safe harbor. Revenue Procedure 2026-20 says that a qualifying investment trust may stake its digital assets without losing its federal tax classification as an investment trust and grantor trust, provided it meets every condition in the procedure. It does not make staking tax-free or cover crypto trusts generally.
What Revenue Procedure 2026-20 allows
The Internal Revenue Service issued Revenue Procedure 2026-20 on October 6, 2026. It clarifies, modifies and supersedes Revenue Procedure 2025-31. Under section 6.01, when a trust within the procedure’s scope satisfies all the safe-harbor requirements, authorizing and carrying out staking does not prevent it from qualifying for federal income tax purposes as an investment trust under Treasury Regulation § 301.7701-4(c) and as a grantor trust.
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This is a conditional rule about the trust’s classification. It is not a general IRS approval of every staking arrangement, nor does it decide how staking rewards are taxed to every trust or holder.
Which trusts and assets are covered
The safe harbor is for a state-law trust that qualifies as both an investment trust and a grantor trust immediately before it meets the procedure’s conditions. The trust’s interests must trade on a national securities exchange, and its staking disclosure must appear in an effective SEC registration statement and remain subject to SEC oversight. It must also maintain written liquidity-risk policies that comply with exchange requirements.
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The trust may hold only cash and units of one type of digital asset. Transactions in that asset must take place on a permissionless network that uses proof-of-stake consensus. The procedure therefore does not extend this safe harbor to trusts holding multiple types of digital assets or to every network and consensus mechanism.
How the trust must arrange staking
Custody, ownership and purpose
One or more custodians must hold the trust’s assets and control the relevant private keys. The procedure says the trust retains federal tax ownership of its assets while they are staked. Staking must serve to protect and conserve trust property, not to improve holders’ investments by taking advantage of market variations.
The trust’s activities are limited to the functions specified in the procedure: holding assets; handling creations and redemptions; paying expenses; distributing assets; liquidating; and directing permitted staking and unstaking. See Revenue Procedure 2026-20 for the full list and requirements.
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Staking provider and oversight
The trust and its sponsor must be unrelated to the staking provider. The trustee, sponsor or custodian must conduct appropriate due diligence, and both the provider arrangement and reward allocation must be arm’s length. The trust and custodian may not control the provider’s activities beyond giving the permitted staking and unstaking directions.
Slashing protection
The trust must be indemnified, consistently with fiduciary obligations, against slashing caused by activities or events reasonably within the provider’s control or ability to protect against. The condition concerns that category of risk; it is not a promise that every possible loss will be reimbursed.
Liquidity, unstaked assets and the 85% and 15% figures
The procedure permits a liquidity reserve when needed under the trust’s exchange-compliant policies. It also identifies circumstances that can temporarily leave assets unstaked and allows qualifying contingent liquidity arrangements for near-term distributions. Applicable assets generally must be made available for staking as soon as reasonably possible after the relevant circumstance ends.
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| Figure in Revenue Procedure 2026-20 | What it means |
|---|---|
| 85% | The IRS describes exchange listing standards under which a trust with less than 85% of assets readily available to meet daily redemption requests must have and disclose written liquidity-risk policies and procedures. |
| 15% | Staked assets exceeding 15% of trust assets, when they are not readily available for redemption within one business day, are a circumstance particularly relevant to liquidity disclosure. This is not a universal limit on how much a trust may stake. |
These percentages describe liquidity and disclosure considerations in the procedure, not a separate general staking cap. The trust still has to meet its applicable exchange requirements and the procedure’s liquidity conditions. Both figures are described by the IRS in Revenue Procedure 2026-20.
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Rewards must be in the same form as the trust’s single type of held digital asset. The trust must distribute net rewards proportionately to holders, either in kind, after selling the rewards for cash, or through a combination of those methods. Distribution is due no more than 60 days after the end of the calendar quarter in which the trust gains dominion and control over the rewards, as specified in the procedure.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Effective date and transition from the 2025 procedure
Revenue Procedure 2026-20 applies to tax years ending on or after October 6, 2026. A trust within scope has six months after that date to implement the requirements, including by amending its trust agreement, revising its processes and procedures, or both.
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A trust that complied with Revenue Procedure 2025-31, or that complies with the clarified and modified requirements, may continue to rely on the earlier safe harbor during that same six-month transition period. After the period, the 2025 procedure may no longer be relied on; the current authority is Revenue Procedure 2026-20.
What the safe harbor does not decide
The procedure does not determine whether staking income is effectively connected income or unrelated business taxable income, and it does not settle the treatment of other digital-asset events such as forks and airdrops. The IRS separately lists Revenue Ruling 2023-14, which addresses the taxability of staking income. A trust’s classification under this safe harbor and the tax treatment of a particular reward or transaction are separate questions. The IRS’s digital assets guidance provides its broader topic index; trust-specific consequences depend on the facts and applicable tax rules.
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