On October 6, 2026, the Internal Revenue Service issued Revenue Procedure 2026-20, which clarifies, modifies, and supersedes Revenue Procedure 2025-31, the safe harbor for investment trusts and grantor trusts that stake digital assets. The central concern for these vehicles is that staking could be treated as a power to “vary the investment” of certificate holders, which could cost the trust its classification as an investment trust and lead to its reclassification as a business entity for tax purposes.
The new guidance responds to questions raised by practitioners after the 2025 safe harbor was issued. It confirms that a trust’s digital assets may be held by one or more custodians. It requires that the trust be indemnified against slashing penalties arising from events reasonably within the staking provider’s control. It also permits contingent liquidity arrangements, such as a lending facility or an agreement to buy or sell digital assets, to help the trust meet redemption requests, although an arrangement the trust treats as a borrowing for federal income tax purposes does not qualify.
Staking rewards must consist of additional units of the same digital asset the trust already holds and, after expenses, must be distributed to holders in kind or in cash no later than 60 days after the end of the calendar quarter in which the trust gains control over them. Trusts have six months from October 6, 2026 to amend their trust agreements and procedures, and trusts that complied with the 2025 safe harbor may continue to rely on it during that period only. The revenue procedure applies to tax years ending on or after October 6, 2026.