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Start with the current IRS rule
As of October 7, 2026, the relevant published IRS safe harbor is Revenue Procedure 2026-20. It clarifies, modifies, and supersedes Revenue Procedure 2025-31. The current procedure applies to tax years ending on or after October 6, 2026, and its requirements—not an earlier summary of them—should guide the trust’s review. See the current procedure and the 2025 predecessor.
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The procedure’s scope is limited. Before the trust can rely on its staking safe harbor, it must qualify as an investment trust under Treasury Regulation § 301.7701-4(c) and as a grantor trust immediately before satisfying all of the safe-harbor requirements. Meeting those starting conditions does not substitute for meeting the operational and structural conditions that follow.
Use the transition period to set a compliance calendar
The IRS provides a six-month period after October 6, 2026, for qualifying trusts to implement the revised requirements. A trust that met the prior safe harbor may rely on it during that transition period; once the period ends, Revenue Procedure 2025-31 is no longer available for reliance. The procedure’s transition terms replace the predecessor’s amendment timing, so do not apply the older language as if it were still current. Confirm the exact transition provisions against the trust’s tax year and circumstances.
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Make a dated implementation plan: identify amendments, disclosure updates, provider-contract changes, liquidity procedures, or other operational work that may be needed, then record when each is completed. The transition is not an indefinite extension of the former procedure.
Check every condition against the trust’s documents and actual operations
Revenue Procedure 2026-20’s section 6.02 is controlling. This practical map helps organize a review; it is not a substitute for reading the full provision or determining how it applies to a particular trust.
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Exchange listing and disclosure
- Confirm that trust interests are traded on a national securities exchange and that the trust complies with applicable exchange rules.
- Check that staking is disclosed in an effective SEC registration statement and subject to SEC oversight.
- Review the trust’s written liquidity-risk policies for compliance with exchange rules.
Assets, network, custody, and ownership
- Verify that the trust holds only cash and units of one type of digital asset, and that transactions occur on a permissionless proof-of-stake network.
- Confirm that one or more custodians control the relevant addresses and private keys.
- Establish that the trust retains federal tax ownership of its assets while they are staked.
Purpose, permitted activities, and decision-making
- Confirm that staking is undertaken to protect and conserve trust property against a majority-control risk that could reduce the asset’s value.
- Compare the trust agreement and actual activities with the procedure’s constraints on trust powers. The agreement must prohibit seeking to exploit market variations to improve holders’ investments.
- Check that the trust, sponsor, and custodian do not direct or control the staking provider’s activities beyond the permitted directions to stake or unstake.
Provider relationships and protections
- Confirm that custodians facilitate staking through providers and that both the trust and sponsor are unrelated to the provider.
- Review provider due diligence, the arm’s-length contract, and the arrangement for allocating rewards against the procedure’s requirements.
- Check that the trust is indemnified for slashing attributable to matters reasonably within the provider’s control or ability to protect against.
Liquidity and unstaked assets
Confirm that assets are generally available for staking while allowing only the liquidity reserves and temporary or contingent liquidity events the procedure specifies. The IRS highlights liquidity risk when staked assets exceed 15 percent of trust assets on a given day and are not readily available within one business day for redemption requests. That is a disclosure context in the procedure, not a universal 15 percent tax-eligibility cap.
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Check that new assets received through staking are additional units of the same digital-asset type. Net rewards—including newly minted units and transaction fees—must be distributed proportionately in kind, sold and distributed in cash, or handled through a combination of those methods no more than 60 days after the end of the calendar quarter in which the trust gains dominion and control over them.
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Keep tax classification separate from securities-law analysis
The SEC Division of Corporation Finance’s May 29, 2025 statement describes staff views under the federal securities laws for certain protocol-staking activities, including solo, self-custodial, and custodial staking. It does not decide whether a trust satisfies the IRS safe harbor. The IRS procedure includes exchange and disclosure conditions, so the two analyses may need to be coordinated, but one is not a substitute for the other. Read the SEC staff statement alongside the IRS procedure, not in place of it.
Document reward reporting and the trust’s tax analysis
The IRS treats digital assets as property for U.S. tax purposes. Its digital-assets guidance says transactions should be reported whether or not they result in taxable gain or loss, and it identifies staking as an activity that may lead to a Yes answer to the digital-assets question. The IRS recommends records covering purchases, receipts, sales, exchanges, other dispositions, and fair market value information. How a particular trust and its holders report rewards depends on their facts and tax classification.
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Grantor-trust status matters because Internal Revenue Code § 671 generally attributes items of income, deductions, and credits from a portion of a trust to the person treated as its owner, subject to statutory limits. That attribution rule does not, by itself, determine the treatment of a specific staking reward or what a particular holder must report. See 26 U.S.C. § 671.
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Escalate facts the safe harbor does not cover
Do not infer that failing one condition automatically disqualifies a trust, or that a trust outside the procedure necessarily qualifies. The IRS says no inference should be drawn about similar consequences for arrangements beyond the safe harbor’s limited scope. It also leaves unresolved other federal income-tax questions, including whether staking income is effectively connected income or unrelated business taxable income.
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Ask qualified tax counsel to assess the trust agreement, its starting classification, contracts, exchange disclosures, custody and provider arrangements, liquidity and slashing protections, reward handling, and relevant tax year. This is especially important if the trust holds other assets, uses a different protocol or custody model, has unusual provider relationships, lacks the specified indemnity or liquidity arrangements, or handles rewards differently from the procedure.
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