Tax Insight

Treasury, IRS issue Notice 2026-62 and Revenue Ruling 2026-20

Insight
5 minute read
October 06, 2026

What happened?

Treasury and the IRS on September 28 issued Notice 2026-62 (the Notice) and Rev. Rul. 2026-20 (the Revenue Ruling) on certain investment fund strategies involving exchange traded funds (ETFs) and other financial products. These documents follow from a panel held by the Wall Street Tax Association on July 21, 2026, where Treasury officials addressed a similar set of concerns.

Why is it relevant?

In summary, the Notice

highlights several strategies involving ETFs and ‘tax-aware’ funds that Treasury and the IRS state may produce federal income tax results inconsistent with the purpose and proper application of existing rules;
signals potential further guidance or other action related to those investment fund strategies and notes that the IRS may challenge those strategies on examination under existing law; and
requests comments and information regarding the transactions described in the Notice and similar transactions.

The Revenue Ruling, issued concurrently with this Notice, outlines Treasury’s and the IRS’s analysis regarding the federal income tax characterization of certain Section 351 transactions involving ETFs.

Actions to consider

Market participants should evaluate how the guidance may affect the activities covered by the Revenue Ruling and the Notice, including Section 351 ETF seeding and subsequent portfolio changes and the exchange fund variation of this trade, other ETF strategies involving Section 852(b)(6), and the ‘tax-aware’ financial product strategies. They should also consider whether to comment on the scope of any future guidance. Comments are due October 28, 2026.