IRS Clarifies Staking Rules for Trusts, Setting a High Bar for Compliance

The U.S. Internal Revenue Service (IRS) has issued Revenue Procedure 2026-20, providing clearer guidance on the tax treatment of Proof-of-Stake (PoS) staking activities for certain trusts. This update effectively allows qualified investment trusts and grantor trusts to treat compliant staking as a "property preservation activity," enabling them to maintain their favorable passive tax status.

The Importance of Passive Status

For trusts, being classified as a passive entity is critical. Under Internal Revenue Code (IRC) Sections 671–677, investment trusts and grantor trusts benefit from specific tax advantages, with income typically treated on a pass-through basis. If their activities are deemed "active trades or businesses," they risk losing these benefits and facing significantly higher tax liabilities.

By carving out a safe harbor, the IRS is removing a major point of uncertainty. Eligible staking is now distinguished from active business operations, allowing trusts to participate in network validation and earn rewards without jeopardizing their core tax structure.

Navigating the 14-Point Checklist

The safe harbor protection is not automatic. To qualify, a trust must adhere to a detailed set of 14 conditions, including:

  • Asset and Listing Requirements: Trust shares must be listed on a national securities exchange, and the trust must hold only a single type of digital asset.
  • Custody and Security: Assets used for staking must be held by a qualified third-party custodian.
  • Liquidity Management: The trust must implement and follow a liquidity policy approved by the Securities and Exchange Commission (SEC).
  • Reward Handling: Staking rewards cannot be accumulated indefinitely. They must be regularly disposed of or reinvested according to established policy, ensuring the trust's operations remain passive.

These rules are designed to ensure that a staking trust functions purely as an investment vehicle, not as an active business operator.

Effective Date and Implications

The guidance applies to taxable years ending on or after November 10, 2025. It provides much-needed legal certainty for traditional trust structures looking to enter the digital asset staking space.

For the crypto industry, this paves the way for broader institutional capital to flow into PoS networks in a compliant manner, potentially enhancing network security. It also establishes a clear compliance benchmark, requiring trust managers to carefully assess their structure against all 14 conditions before adopting a staking strategy.