This week, Kenneth Kies, the Treasury Department's Assistant Secretary for Tax Policy, told a tax conference hosted by BakerHostetler that Treasury is "taking a close look at" the §1202 planning technique known as stacking. His remarks suggest Treasury is considering guidance in this area, though the timing and scope remain open questions.
If you are a founder, early employee, or investor who has executed — or is considering — a multi-trust QSBS plan, this is the moment to take a hard look at your structure.
What Stacking Is, in One Paragraph
The §1202 gain exclusion is calculated per taxpayer, per issuer. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, raised the cap to the greater of $15 million or 10x basis for QSBS issued after that date (with tiered 50/75/100 percent exclusion at 3/4/5 years of holding). Because each non-grantor trust is treated as a separate taxpayer for federal income tax purposes, a founder can — in principle — gift QSBS into several irrevocable non-grantor trusts benefiting different family members, with each trust claiming its own exclusion. Five trusts, five exclusions. That's stacking.
What Treasury Actually Said
Reporting in the Bloomberg Daily Tax Report (May 21, 2026) says Kies told the BakerHostetler audience that investors are "going beyond" the one-trust-per-family-member scenario, and that Treasury is taking a close look at more aggressive structures. The OBBBA expanded the §1202 exclusion but did not statutorily address stacking. Kies's remarks suggest Treasury may pursue administratively what Congress did not address legislatively — though Treasury's options, scope, and timing all remain to be seen.
The Existing Legal Landscape
Two pieces of background worth knowing:
1. §643(f) is already on the books. That provision empowers Treasury to treat two or more trusts as a single trust if (i) the trusts have substantially the same grantor and substantially the same primary beneficiary, and (ii) a principal purpose of the arrangement is the avoidance of federal income tax. The statutory hook for an anti-stacking rule has existed for decades.
2. Treasury tried this once before. In 2018, proposed regulations under §643(f) included a presumption that separate trusts had a tax-avoidance purpose if they produced a significant income tax benefit that could not have been achieved without the separate trusts. That presumption was dropped from the final regulations. Whatever Treasury does next, expect the 2018 proposal to be the starting point.
What's Likely — and What Isn't
Treasury can issue regulations or sub-regulatory guidance interpreting §643(f) and the broader anti-abuse doctrines. Treasury likely cannot, however, simply rewrite §1202's statutory per-taxpayer framework by regulation alone. Likely outcomes:
- Proposed regulations or a notice articulating factors that cause multiple trusts to be aggregated for §1202 purposes
- An anti-abuse rule targeting structures with overlapping beneficiaries, common trustees acting in concert, or other "single economic unit" features
- Any new guidance would most likely apply prospectively or provide transition protection — though retroactivity questions always matter in tax guidance, particularly where anti-abuse doctrines, sham-trust theories, the step transaction doctrine, or §7805(b) effective-date authority come into play
The bottom line: completed transactions likely carry materially lower regulatory risk than future planning structures, but facts, structure, and timing matter in every case.
What to Do This Quarter
If you have an existing stacked structure:
- Document the non-tax purposes. Estate planning, creditor protection, generational wealth transfer, governance considerations — these are real, articulable reasons for separate trusts. Get them in the file now, not in response to a future audit notice.
- Confirm true separateness. Distinct primary beneficiaries, independent trustees, no de facto common control, separate investment decision-making.
- Do not add new trusts to an existing stack without fresh analysis.
If you are considering stacking:
- Move thoughtfully, but do not panic. Anti-abuse guidance, when it comes, would most likely apply prospectively or provide transition relief — though retroactivity questions are never fully off the table.
- Get the planning right the first time. A poorly papered stack is the gift that keeps on giving — to the IRS.
- Coordinate trust counsel, tax counsel, and corporate counsel. §1202 turns on facts at the corporate level (qualified trade or business, the $75M gross asset ceiling, original issuance) and at the holder level (separate-taxpayer status). All three pieces have to line up.
The Bigger Picture
The OBBBA expansion made QSBS a much larger prize. Bigger prize, bigger target. Expect Treasury activity across §1202 generally over the next 12–18 months — not just stacking, but SAFE/convertible note holding periods, carried-interest interactions, and the qualified-trade-or-business test. The planning environment is more uncertain than it was a year ago, which is precisely why getting the structure and documentation right matters more than ever.
Have questions about your QSBS position or a planned stacking transaction? I work with founders, early employees, and investors nationwide on §1202 planning, attestation, and structuring. Book a 20-minute call to discuss your situation.
Joe Wallin is a startup and tax attorney at Carney Badley Spellman in Seattle. He chairs the Angel Capital Association's Legal Advisory Committee and co-authored Angel Investing: Start to Finish (Holloway).
