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A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11Yes—but only qualifying trusts that meet the conditions in IRS Revenue Procedure 2026-20. The safe harbor says that staking will not, by itself, prevent a covered trust from qualifying as an investment trust and a grantor trust for federal income tax purposes. It does not cover every crypto trust or make staking rewards tax-free.
What Revenue Procedure 2026-20 changes
The Internal Revenue Service issued Revenue Procedure 2026-20 on October 6, 2026. It clarifies, modifies, and supersedes Revenue Procedure 2025-31. As of October 7, 2026, the 2026 procedure is the current authority for this safe harbor.
The rule is narrow: if a trust falls within the procedure and satisfies every requirement, its authorization and staking of trust assets do not prevent it from qualifying as an investment trust under Treasury Regulation § 301.7701-4(c) and as a grantor trust. This concerns the trust’s federal tax classification—not whether its rewards are tax-free, or how a particular holder must report income.
Which trusts and staking arrangements are covered?
The safe harbor applies to state-law trusts that already qualify as both investment trusts and grantor trusts immediately before satisfying the procedure’s conditions. It covers assets transacted on permissionless networks that use proof-of-stake consensus; it is not a blanket rule for every digital asset, network, or trust structure.
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- Exchange listing and disclosure: Trust interests must trade on a national securities exchange. The trust’s staking disclosure must appear in an effective SEC registration statement, remain subject to SEC oversight, and be supported by written liquidity-risk policies that comply with exchange requirements.
- Eligible holdings: The trust may hold cash and units of just one type of digital asset. Transactions in that asset must take place on a permissionless proof-of-stake network.
- Existing classification: The trust must already meet the investment-trust and grantor-trust classifications before it relies on the safe harbor.
These limits make the rule relevant chiefly to a particular kind of exchange-traded trust—not to an individual who stakes crypto in a personal wallet.
Custody, provider independence, and permitted activity
One or more custodians must hold the trust’s assets and control the relevant private keys. The procedure states that the trust retains federal tax ownership of assets while they are staked. The trust and its sponsor must be unrelated to the staking provider, and the trustee, sponsor, or custodian must conduct appropriate due diligence. The provider arrangement and allocation of rewards must be arm’s length.
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The trust and custodian cannot direct the provider’s activities except through permitted staking and unstaking instructions. Staking must serve to protect and conserve trust property. Trust activity is limited to the functions the procedure allows, including holding assets, processing creations and redemptions, paying expenses, making distributions, liquidating, and directing permitted staking. The trust may not seek to improve holders’ investments by taking advantage of market variations.
The provider must indemnify the trust, consistently with fiduciary obligations, against slashing caused by events or activities reasonably within the provider’s control or ability to guard against. The procedure’s conditions therefore address not just who stakes, but also who controls the keys, bears operational risk, and can give instructions.
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Liquidity rules and the 15% figure
The trust must maintain exchange-compliant written liquidity-risk policies. Revenue Procedure 2026-20 discusses exchange listing standards under which a trust with less than 85% of its assets readily available to meet daily redemption requests must have and disclose written liquidity-risk policies and procedures. The procedure also identifies staked assets exceeding 15% of trust assets, when not readily available for redemption within one business day, as a circumstance particularly relevant to liquidity disclosure. That 15% figure is not a universal cap on how much a trust may stake.
The procedure allows a liquidity reserve when needed under the trust’s compliant policies and recognizes specified circumstances in which assets may temporarily remain unstaked. It also permits qualifying contingent liquidity arrangements for near-term distributions. Assets affected by a permitted circumstance generally must be made available for staking as soon as reasonably possible once that circumstance ends.
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How staking rewards must be handled
Net rewards must be distributed proportionately to trust holders. The trust may distribute them in kind, sell them and distribute cash, or use a combination of those methods. Distribution must occur no more than 60 days after the end of the calendar quarter in which the trust gains dominion and control over the rewards.
Rewards must be in the same form as the trust’s single type of held digital asset. The deadline runs from the quarter in which the trust gains dominion and control—not necessarily from the date a validator first earns a reward.
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Effective date and transition from the 2025 procedure
Revenue Procedure 2026-20 is effective for tax years ending on or after October 6, 2026. A trust within scope has six months after that date to implement the requirements, which may include amending its trust agreement, revising processes and procedures, or both.
A trust that complied with Revenue Procedure 2025-31, or complies with the clarified and modified requirements in the 2026 procedure, may continue to rely on the earlier safe harbor for up to the same six-month transition period. After that period, it may no longer rely on the 2025 procedure.
What the safe harbor does not decide
The procedure addresses whether qualifying staking prevents the trust from meeting the specified trust classifications. It does not determine whether staking income is effectively connected income or unrelated business taxable income, and it does not settle tax treatment of other digital-asset events such as forks and airdrops.
The IRS separately addresses the taxability of staking income in Revenue Ruling 2023-14, listed on its Digital assets guidance page. The trust-classification rule and the income-recognition or character rules for a particular holder are separate questions.
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