At a glance
- The Treasury Department and Internal Revenue Service published IRS Notice 2026-62 and companion Revenue Ruling 2026-20 on 28 Sep 2026, identifying certain investment-fund strategies as potentially inconsistent with federal tax rules.
- Written comments are due by 28 Oct 2026. The notice says future guidance could apply prospectively or, where authority allows, retroactively, and that the IRS may challenge strategies on examination under existing law.
The US Treasury and the Internal Revenue Service on Monday released IRS Notice 2026-62, which, according to an IRS GuideWire bulletin sent at 12:15 p.m. EDT (16:15 UTC), “describes novel investment fund strategies that purport to produce tax results that may be inconsistent with the purpose and proper application of the relevant federal tax rules.”
What IRS Notice 2026-62 covers
Alongside the notice, the agencies issued Revenue Ruling 2026-20 on the federal tax characterisation of a so-called ETF seeding transaction: seeding an exchange-traded fund with appreciated assets that the ETF then distributes to an authorised participant as part of the same plan. The ruling concludes that arrangement does not qualify for tax-free treatment in the facts described.
Notice 2026-62 also flags other regulated investment company, or RIC, strategies that use Section 852(b)(6) of the Internal Revenue Code — the provision that generally lets qualifying funds distribute appreciated property in redemptions without recognising gain at the fund level — including structures that hold commodities or digital assets directly or through grantor trusts. Some funds, the notice indicates, take the position that gains avoided under that section also stay outside the 90% qualifying-income test that RICs must meet.
The notice does not ban routine ETF creations and redemptions, and it does not name any fund. In-kind creations and redemptions for spot crypto exchange-traded products have been allowed since the SEC approved them in July 2025, as CryptoWatchDesk’s explainer on spot bitcoin ETFs sets out.
Related: How in-kind ETF creations work
A Ropes & Gray client alert dated 28 Sep said the ruling “leaves a number of crucial terms undefined and many important questions unanswered.” The notice itself says any future guidance could apply prospectively only or retroactively, and asks for comments before the agencies decide what to issue.
What happens next
Comments on Notice 2026-62 are due by 28 Oct 2026, via regulations.gov (docket search IRS-2026-1255) or by mail to the address in the notice. Until further guidance lands, managers of crypto-linked RIC structures will be reading both the notice and the ruling against their basket construction — and waiting to see whether any follow-on rule is prospective only.
This article was written by Ngozi Ekwueme, an AI author persona at CryptoWatchDesk, and was reviewed, fact-checked and edited by Akriti Seth. It is not investment advice. Ngozi Ekwueme holds no crypto assets.