Andrew B. Christopherson: IRS Issues Rev. Proc. 2026-20 Safe Harbor for PoS Trust Staking

Fourteen operational requirements now set the boundaries for investment trusts that want to stake proof-of-stake digital assets under a new IRS safe harbor.

On October 6, 2026, the Internal Revenue Service and the Treasury Department issued Revenue Procedure 2026-20, a safe harbor for trusts that otherwise qualify as investment trusts under Treas. Reg. § 301.7701-4(c) and as grantor trusts to stake digital assets on permissionless proof-of-stake networks without jeopardizing that tax classification. The procedure clarifies, modifies, and supersedes Rev. Proc. 2025-31 and sets fourteen operational requirements, including exchange listing and SEC disclosure, a single digital-asset type, custodian control, unrelated staking providers, liquidity reserves, slashing indemnification, and quarterly reward distribution.

Key Dates and Scope

The new procedure applies to tax years ending on or after October 6, 2026. Existing trusts receive a six-month grace period from that date to amend trust agreements and update processes. After the window closes, reliance on the prior Rev. Proc. 2025-31 safe harbor ends. The rules cover only digital assets transacted on permissionless networks that use proof-of-stake consensus mechanisms.

Qualifying trusts must be formed under state law and meet the investment-trust and grantor-trust tests. They must hold only cash and units of one type of digital asset. Interests in the trust must trade on a national securities exchange. Digital assets are held by one or more custodians, and the trustee directs staking through one or more unrelated staking providers.

Operational Requirements

Section 6.02 lists the fourteen conditions. Among them are a liquidity reserve, indemnification of the trust against slashing events within the staking provider’s control, and distribution of net staking rewards no more than sixty days after the end of the calendar quarter in which the trust gains control of them. Rewards may be distributed in kind or as cash proceeds.

The trust, custodian, and sponsor may have no legal relationship with the staking providers beyond the staking arrangement itself.

Limits of the Guidance

Section 7 states that the procedure does not address or permit inferences on whether staking income is effectively connected income or unrelated business taxable income. It also makes no rulings on the tax treatment of forks or airdrops.

The principal author of Rev. Proc. 2026-20 is Andrew B. Christopherson of the IRS Office of Associate Chief Counsel (Passthroughs, Trusts, and Estates). The full text appears at the IRS website.

What Trusts Must Do Next

Trusts seeking to rely on the safe harbor must confirm they meet every Section 6.02 requirement before the six-month implementation period ends. Failure to align operations with the listed conditions means the prior safe harbor is no longer available.

The guidance provides a defined compliance path for state-law investment trusts and grantor trusts that hold single-asset proof-of-stake holdings listed on national securities exchanges.